sources:layout 1 9/28/2010 12:56 pm page ... - thomas sowell · article by thomas hazlett in a book...

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S O U R C E S

It is neither possible nor necessary to document the source of every statement madein this book. However, there are some key facts which some readers may want tocheck out or to explore further. Rather than clutter the text with footnotes, in abook intended for the general public, the citations are listed here in an informalway that should nevertheless make it possible to find the original sources.

The epigraph by Steven Landsburg at the beginning of the book is frompage 197 of his book The Armchair Economist.

CHAPTER 1: WHAT IS ECONOMICS?

The epigraph is from page 61 of The Economist as Preacher and OtherEssays by George J. Stigler. Data on the value of natural resources per capitain Japan, Switzerland, Uruguay and Venezuela are from page 27 of Cultureand Prosperity by John Kay, and data on the incomes in these four countriesare from pages 793, 837, 847, and 848 of The World Almanac, 2006. Thearticle about middle-class Americans began on the front page of Section 3of the New York Times of August 1, 1999 and was written by LouisUchitelle. The fact that the Soviet Union produced more steel, but fewersteel products, than the United States is from page 128 of The TurningPoint: Revitalizing the Soviet Economy by Nikolai Shmelev and VladimirPopov. Differences between the efficiency of energy use in China and Japanwere noted on page 50 of the April 11, 2005 issue of BusinessWeek magazine.The statement that Marxist economist Oskar Lange did not differfundamentally from Milton Friedman on certain basic propositions and

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procedures can be verified by reading Oskar Lange, “The Scope andMethod of Economics,” in the Review of Economic Studies (1945–1946),pages 19 to 32, and comparing that with Milton Friedman’s essay “TheMethodology of Positive Economics,” in his book Essays in PositiveEconomics. The estimate of millions of people rising out of poverty in Indiais from page B1 of the May 5, 2006 issue of the Wall Street Journal, in anarticle titled “Newspaper Nirvana?” The reduction in the number of peopleliving in extreme poverty in China was reported on page 110 of the April21, 2007 issue of The Economist, under the heading “Poverty.”

CHAPTER 2: THE ROLE OF PRICES

The epigraph is from page 168 of The White Man’s Burden by WilliamEasterly. The quotation about China’s imports of food is from page 79 of theMay 24, 2004 issue of Forbes magazine, in an article titled “Feed Me.” Thefact that KFC has more sales in China than in the United States is frompage 82 of the same article. The increase in per capita dairy consumption inChina was reported on page B5 of the January 2, 2009 issue of the New YorkTimes, in an article titled “Awash in Milk and Headaches,” which began onpage B1. The rising rates of obesity in China were reported on page A18 ofthe July 8, 2008 issue of the Wall Street Journal, in an article titled “Obesityin China Becoming More Common.” British Prime Minister MargaretThatcher’s comment about Soviet President Mikhail Gorbachev’s lack ofknowledge of economics is from page 81 of Statecraft: Strategies for aChanging World by Margaret Thatcher. The various quoted statistics andanalyses about the Soviet economy in various parts of the chapter are fromThe Turning Point: Revitalizing the Soviet Economy by Soviet economistsNikolai Shmelev and Vladimir Popov, especially pages 129, 130, 131, 141,160, 170, 181, 213. Boris Yeltsin’s experience in an American supermarketwas described on pages 317 and 318 of Down with Big Brother by MichaelDobbs; his reactions were described on page 291 of The Ideas ThatConquered the World by Michael Mandelbaum and on page 329 of Yeltsin byLeon Aron. The quotations about home prices in Phoenix are from page A1

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of the June 18, 2006 issue of The Arizona Republic in an article titled “HowLow Will It Go?” Information on how long homes for sale remained on themarket is from pages A1 and A20 of the same article. Information onsimilar trends nationwide is from an article beginning on the front page ofthe Wall Street Journal of August 23, 2006, titled “Housing Slump ProvesPainful for Some Owners and Builders.” Information on Ghana and theIvory Coast is from a book by Robin W. L. Alpine and James Pickett,Agriculture, Liberalisation and Economic Growth in Ghana and Côte D’Ivoire:1960–1990, published in Paris by the Organisation for Economic Co-operation and Development. South Korea’s surpassing of India, afterstarting from a similar economic level, was mentioned on page 222 of TheCommanding Heights by Daniel Yergin and Joseph Stanislaw. India’srelaxation of government controls over its economy was reported on page 13of the June 2, 2001 issue of The Economist. India’s average growth rate of 2percent from 1950 to 1990 was reported on page 279 of Culture andProsperity by John Kay. The quote from Friedrich Engels is from page 19 ofhis preface to the first German edition of The Poverty of Philosophy by KarlMarx. The comment on the role of prices in connecting the far-flungactivities in a market economy is from page 172 of The Turning Point byShmelev and Popov. The use of food and electricity in an Israeli kibbutz,before and after prices were charged for them, was discussed on pages 332and 333 of Heaven on Earth: The Rise and Fall of Socialism by JoshuaMuravchik. The role of rising oil prices in bringing new oil reserves intoproduction was explained on page A1 of the Wall Street Journal of March27, 2006 in an article titled “As Prices Surge, Oil Giants Turn Sludge IntoGold.” Information about oil reserves in Canada is from page 72 of the May26, 2007 issue of The Economist, under the headline “Building on Sand.”The decline in apartment rents across the United States was reported in anews story beginning on page A1 of the November 29, 2003 issue of theNew York Times titled “Apartment Glut Forces Owners to Cut Rents inMuch of U.S.” The decline in the price of insurance premiums charged toairlines was reported on page C1 of the February 14, 2007 issue of the WallStreet Journal, in an article titled “Fewer Crashes May Have Lulled AirlineInsurers.” The relationship between housing prices and population changes

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in upstate New York was described on page 70 of an article titled “Down-and-Out Upstate,” in the Autumn 1999 issue of City Journal. The quotefrom Will Rogers is from page 193 of A Will Rogers Treasury, edited byBryan B. Sterling and Frances N. Sterling.

CHAPTER 3: PRICE CONTROLS

The epigraph is from page 329 of The Wisdom of Henry Hazlitt. The factthat the housing shortage in the United States occurred when there was nochange in the ratio of housing to people is from a book titled Roofs orCeilings? by Milton Friedman and George J. Stigler. The book itself has longbeen out of print, but excerpts from it were included in a collection ofwritings titled Rent Control: Costs & Consequences, edited by Robert Albon.This particular statement occurs on page 16. The fact that nearly half therent-controlled apartments in San Francisco had only one tenant is frompage 21 of San Francisco Housing DataBook, a 2001 study commissioned bythe city and produced by consultants called Bay Area Economics. The factthat 48 percent of the households in Manhattan had just one occupant isfrom page A2 of the September 3, 2005 issue of the San Francisco Chronicleunder the title “Census: More Americans Living Alone.” Many of the factsabout rent control and homelessness in the United States are from TheExcluded Americans by William Tucker (especially pages 162, 163, 275 andChapter 19, which discusses various elite celebrities living in rent-controlledapartments). The comment from the New York Times is from page 40 of anarticle by John Tierney in their Sunday magazine section of May 4, 1997,titled “At the Intersection of Supply and Demand.” The lack of building inMelbourne under Australian rent control was mentioned on page 125 ofRent Control: Costs & Consequences, edited by Robert Albon. The effects ofrent control in Egypt were discussed on page 43 of Now They Call Me Infidelby Nonie Darwish. The age of rent-controlled housing in San Francisco isfrom page 56 of San Francisco Housing DataBook, cited above. The highvacancy rate in commercial and industrial buildings was discussed on pageB6 of the January 7, 2004 issue of the Wall Street Journal under the title

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“Study Sees Record Industrial Space Vacancies.” Facts about the effects ofrent control in England, Wales, and other European countries are from RentControl in North America and Four European Countries by Joel F. Brennerand Herbert M. Franklin, pages 4 and 69. The decline of the housing stockunder rent control in Washington was cited on pages 282 and 283 of anarticle by Thomas Hazlett in a book titled Resolving the Housing Crisis. Thedecline in London’s rental advertisements is from page 11 of the January 24,1975 issue of The Times of London. The withdrawal of rental units after theimposition of rent control in Toronto was mentioned on page 21 of Zoning,Rent Control and Affordable Housing by William Tucker. Data on thenumber of buildings taken over by the city government in New York can befound on page 99 of The Homeless by Christopher Jencks. The fact thatbuilding resumed in various Massachusetts communities after the statebanned local rent control laws can be found in a study by William Tucker,titled “How Rent Control Drives Out Affordable Housing,” Policy Analysis,number 274, published by the Cato Institute. The news story illustrating thenon-comparability of rents under New York’s rent control laws appeared onthe front page of the Wall Street Journal of March 21, 1994 under the title“Some Rich and Famous of New York City Bask in Shelter of Rent Law.”Information on the benefits of rent control being greater for tenants inluxury housing is from pages 62 and 64 of the Summer 2006 issue of CityJournal in an article titled “Is There a New York Housing Crisis?” SanFrancisco’s experience under rent control is from a study whose results werereported on page 13 of the San Francisco Weekly of January 30, 2002 in anarticle titled “Legends in Our Own Minds.” The paradox of higher rents inrent-controlled cities is from William Tucker’s study, “How Rent ControlDrives Out Affordable Housing,” Policy Analysis, number 274, cited above.The data on housing in San Francisco after the 1906 earthquake are onpages 5 and 6 of Rent Control: Costs & Consequences, edited by RobertAlbon. Information on the amounts of gasoline sold during the 1970sgasoline shortages is from table 8a in Section VII of the September 1984Basic Petroleum Data Book, published by the American Petroleum Institute.See also “Experts Offer a Host of Reasons for Gas Crisis in New YorkArea,” New York Times, July 29, 1979, pages 1 and 30 and “The Gas Lines

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of ‘79,” The Public Interest, Summer 1980, page 47. Soviet economists’comments on the gasoline shortage in the United States are from page 89of The Turning Point by Nikolai Shmelev and Vladimir Popov. The fact thatcandy bars were smaller in size in 1943 than they had been previously as aresult of government price controls is from page 15 of The Top Ten Myths ofAmerican Health Care: A Citizen’s Guide by Sally C. Pipes. The smuggling offood during the early years of the Soviet Union was mentioned on page 8 ofThe Turning Point by Shmelev and Popov and their discussion of widespreadblack markets in the later era is on pages 198 and 199. The postwar meatshortage in the United States under price controls was discussed on pages58 and 59 of Prices and Price Controls published by the Foundation forEconomic Education, Inc. The disastrous effects of price controls inZimbabwe were described on pages A1 and A8 of an article titled “Caps onPrices Only Deepen Zimbabweans’ Misery” in the New York Times ofAugust 2, 2007. The effects of price control on the use of medical care werediscussed in detail in Chapter 3 of Applied Economics by Thomas Sowell.London’s newspaper The Guardian reported the story of the British girl whoreceived a breast implant in its November 9, 1998 issue, page 6, under thetitle, “Girl, 12, to Get Breast Implant.” The 10,000 people in Britain whohad waited 15 months or more for surgery were reported in The Economistmagazine on page 55 of its April 13, 2002 issue. The British woman whosecancer surgery was postponed until it had to be cancelled because the cancerhad become inoperable during the long delays was mentioned in TheEconomist of November 24, 2001, on page 52. Data on the relative waitingtimes for elective surgery in five English-speaking countries are from page12 of a study titled Tackling Excessive Waiting Times for Elective Surgery: AComparison of Policies in Twelve OECD Countries by Jeremy Hurst andLuigi Siciliani. The agricultural price support program in general is coveredin Chapter 1 of The Structure of American Industry, ninth edition, by WalterAdams and James W. Brock. The decline in farm income from 1929 to 1932was discussed on page 572 of the November/December 2008 issue of theFederal Reserve Bank of St. Louis Review in an article titled “Changing theRules: State Mortgage Foreclosure Moratoria During the GreatDepression.” The surpluses of wheat and rice created by India’s agricultural

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price support program were reported on page 63 of the Far EasternEconomic Review of December 6, 2001, in an article titled “The Problems ofPlenty.” The quotation about hunger in India, despite surplus food, is frompage A3 of the New York Times of December 2, 2002 in a story titled “Poorin India Starve as Surplus Wheat Rots.” The purchase of nearly 112 millionpounds of powdered milk by the Agriculture Department at a costexceeding $90 million was reported on page B5 of the January 2, 2009 issueof the New York Times, in an article titled “Awash in Milk and Headaches,”which began on page B1. Data on the costs of European Union agriculturalsubsidies in general in 2002 are from page 13 of The Economist of October5, 2002, under the title “Scandalous.” Information on the effects of pricesupports in the sugar industry is from a front-page article in the New YorkTimes of May 6, 2001 titled “Sugar Rules Defy Free-Trade Logic.” Sugarsubsidies in the European Union were described on pages B1 and B4 of theOctober 27, 2009 issue of the New York Times, in an article titled “SubsidiesSpur Fraud in European Sugar.” The costs of the 2002 American farmsubsidy bill were estimated in the National Review online from August 29,2002, in an article titled “Twisting ‘The Facts’.” Inflated prices of lamb,butter, and sugar in the European Union were reported on page 70 of theJune 9, 2001 issue of The Economist in an article titled “Patches of Light.”The statement that every cow in the European Union gets more subsidiesper day than most sub-Saharan Africans have to live on is from page A13 ofthe January 7, 2003 issue of the Wall Street Journal in a column titled “FightPoverty, Not Patents.” The fact that 85 percent of Mexico’s agriculturalsubsidies go to the top 15 percent of farmers is from page A13 of the WallStreet Journal of March 5, 2003. The amount of farm subsidies in the UnitedStates, Japan, South Korea and Norway was reported on page 93 of the July25, 2009 issue of The Economist, under the heading “Agricultural Subsidies.”Discussions of the effects of price controls in besieged sixteenth-centuryAntwerp, as well as the eighteenth-century and nineteenth-century localfood shortages in India are from pages 33 and 34 of Forty Centuries of Wageand Price Controls by Robert L. Schuettinger and Eamonn F. Butler.

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CHAPTER 4: AN OVERVIEW

The epigraph is from pages 292 and 293 of Collected Legal Papers byOliver Wendell Holmes. The quotes from Frederick Engels and AdamSmith are from, respectively, page 476 of Selected Correspondence by KarlMarx and Frederick Engels and page 423 of the Modern Library edition ofThe Wealth of Nations by Adam Smith. The relative costs for security ininner city and suburban shopping malls were discussed on page 251 ofAmerica in Black and White by Stephan Thernstrom and AbigailThernstrom. The fact that nearly 11 percent of American families do nothave a checking account was reported on page A15 of the March 2006Federal Reserve Bulletin in an article titled “Recent Changes in U.S. FamilyFinances: Evidence from the 2001 and 2004 Survey of ConsumerFinances.” The quote from the Soviet manager about not wanting “to geteight years” is from page 134 of The Red Executive by David Granick.Comparisons of bombing and rent control as means of destroying housingappear on pages 422 and 425 of an article by Walter Block titled “RentControl” in The Fortune Encyclopedia of Economics, edited by DavidHenderson. The claim that high-cost housing areas are crowded is frompage A14 of the September 22, 2004 issue of the Wall Street Journal, in anarticle titled “After Big Run-Up in Real Estate, Some on Coasts AreCashing Out,” which began on page A1. Former food-exporting countrieswhich became unable to feed themselves have been mentioned ininnumerable places, including Modern Times by Paul Johnson, pages 724 to727 of the 1992 edition. The quote that “people brought provisions no moreto markets” after the emperor Diocletian’s price controls is from page 24 ofForty Centuries of Wage and Price Controls by Robert L. Schuettinger andEamonn F. Butler. The economic problems of the rich “Black Earthcountry” of Russia were discussed on page A1 of the October 19, 1998 issueof the San Francisco Chronicle, in an article titled “Russian FarmlandWithers on the Vine” and in an article beginning on page A1 of the October16, 1998 issue of the Wall Street Journal titled “Food Lines.” California’ssubsidized water for farmers was discussed on pages A1 and A6 of the May30, 1991 issue of the Wall Street Journal under the title “Big Farmers in West

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Get Subsidized Water Despite Drought Crisis.” The effects of subsidizedwater to farmers in India were reported on page 14 of a special section onIndia’s economy in The Economist of June 2, 2001, under the title “GrimReapers.” The fact that a portion of the taxes and fees paid by airlinepassengers subsidize smaller airports was reported on page B3 of the April16, 2007 issue of the Wall Street Journal, under the headline “Some U.S.Passenger Taxes Subsidize Smaller Airports.”

CHAPTER 5: THE RISE AND FALL OF BUSINESSES

The epigraph is from page 52 of the May 27, 2002 issue of Fortunemagazine. The high rate of failure for new businesses was discussed on page72 of The Rise of the Anti-Corporate Movement by Evan Osborne.Information on the number of A & P stores in 1929 is from pages 89 and90 of the April 14, 2003 issue of Fortune. The fact that 36 companiesdropped off the list of the Fortune 500 in just one year is from page F–21 ofthe same issue. The decline of Japan’s Mizuho bank was reported on pageC1 of the May 8, 2003 issue of the Wall Street Journal in a news story titled“Mizuho’s Fate May Rest on a Japan Bailout.” The fact that SunMicrosystems reported a profit at the same time that Advanced MicroDevices reported a loss was reported on page B3 of the January 24, 2007issue of the Wall Street Journal, in an article titled “Sun, AMD Results MarkDiverging Paths.” The changing profitability of Japanese manufacturers ofcompact disc players was mentioned on page 45 of the Far Eastern EconomicReview of November 28, 2002, in an article titled “Picturing the Future.”U.S. Steel’s fall from its long-held position of number one steel producer inthe world, and its operating at a loss, were reported on page 42 of the July21, 2003 issue of BusinessWeek, in an article titled “Up From the ScrapHeap.” Boeing’s similar fall from its number one position as the world’sleading commercial aircraft producer was reported on page 146 of theNovember 10, 2003 issue of Fortune magazine, in an article titled “Lord ofthe Air.” The problems of Airbus were discussed in two front-page articlesin the Wall Street Journal of July 3, 2006 (“Airbus Problems Lead to Ouster

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of Key Executives”) and July 14, 2006 (“Under Pressure, Airbus RedesignsA Troubled Plane”). The historical sketches of various businesses are basedon information from a variety of sources, including innumerable newspaperand magazine articles, as well as books such as New and Improved: The Storyof Mass Marketing in America written by Richard S. Tedlow, Brand New:How Entrepreneurs Earned Consumers’ Trust from Wedgwood to Dell byNancy F. Koehn, Forbes Greatest Business Stories of All Time by Daniel Grossand the editors of Forbes magazine, Masters of Enterprise by H.W. Brands,Empire Builders by Burton W. Folsom, Jr., The First Hundred Years are theToughest: What We Can Learn from the Century of Competition Between Searsand Wards by Cecil C. Hoge, Sr., A & P by M. A. Adelman, The Rise andDecline of the Great Atlantic & Pacific Tea Company by former A & Pexecutive William I. Walsh and Made in America by Sam Walton. Thedeclining circulation of New York City newspapers is from a story on pageE5 of the New York Times of November 18, 1990 titled, “Suburban SprawlAlso Applies to the Circulation of Newspapers.” The decline in newspapercirculation nationwide from 1947 to 1998 is from pages 268 and 269 of TheFirst Measured Century: An Illustrated Guide to Trends in America,1900–2000 by Theodore Caplow, Louis Hicks, and Ben J. Wattenberg. Dataon newspapers with daily circulation of a million or more copies are frompage ix of Editor and Publisher Year Book, 2005, Part I. The fact thatnewspaper circulation continued to decline by nearly 4 million from 2000 to2006 was shown on the front page of the December 26, 2007 issue of theWall Street Journal, in an article titled “Despite Woes, McClatchy Banks onNewspapers.” The steep declines in the stock market values of both the NewYork Times and the Gannett chain were shown on page A8 of the December29–30, 2007 issue of the Wall Street Journal, in an article titled “Read AllAbout It,” which began on page A1. The big New York department stores’initial rejection of credit cards was mentioned on page 204 of The New YorkTimes Century of Business, edited by Floyd Norris and ChristineBockelmann. The fact that credit card or debit purchases exceeded cashpurchases for the first time in 2003 is from page 130 of an article titled “JustOne Word: Plastic” in the February 23, 2004 issue of Fortune magazine. Thefact that some companies made more profit from their own credit cards than

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from the rest of their business is from page 38 of the March 17, 2003 issueof Fortune. The increased market share for both L.C.D. and plasmatelevision sets in 2006 was reported on page C4 of the December 25, 2006issue of the New York Times, in an article titled “Forget L.C.D.; Go forPlasma, Says Maker of Both.” The decline in sales of Bulova watches wasdiscussed on page A4 of the July 7–8, 2007 issue of the Wall Street Journal,under the headline “Remembrances: Harry B. Henshel (1919–2007).”Forbes magazine’s report on Toyota’s costs and profits is from page 75 of anarticle that began on page 72 of the April 14, 2003 issue, under the title“The ‘Ooof ’ Company.” The statement that Toyota’s profits were greaterthan those of Detroit’s Big Three is from page 10 of the January 29, 2005issue of The Economist under the title “The Quick and the Dead.” Data onthe hours spent producing a car and the rate of defects are from page 117 ofthe November 17, 2003 issue of BusinessWeek, in an article titled “CanAnything Stop Toyota?” The fact that Honda and Subaru surpassed Toyotain Consumer Reports’ annual vehicle reliability rankings in 2007 wasreported on page C11 of the October 17, 2007 issue of the New York Times,in an article titled “Toyota Falls to No. 3 in Reliability Rankings.” Theimproved quality of American-made cars brought about by the competitionwith Asian automakers was reported on page D8 of the October 17, 2007issue of the Wall Street Journal, under the headline “Toyota Slips and FordImproves in Consumer Reports Survey.” The recall of 8 million vehicles byToyota due to dangerous acceleration problems was reported on page 76 ofthe April 19, 2010 issue of BusinessWeek, under the title “Toyota Was inDenial. How About You?” BusinessWeek’s comment on Wal-Mart is frompage 102 of the cover story of its October 6, 2003 issue. The Danish studythat tracked the changes in a company’s profitability after a death in theCEO’s family was discussed on pages A1 and A15 of the September 5, 2007issue of the Wall Street Journal, in an article titled “Scholars Link Success ofFirms to Lives of CEOs.” How much these findings in Denmark wouldapply to American corporations is a question raised by the Wall StreetJournal: “It isn’t clear how applicable the study is to big public companies inthe U.S. or elsewhere, the authors acknowledge. Most of those studied weresmall, family-controlled ones where a shock to the CEO might have more

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impact, though Prof. Wolfenzon said the effects appeared similar across allsizes of Danish companies.” Lenin’s estimate of how easy it was to run anenterprise is from pages 41 and 92 of his book The State and Revolution,written on the eve of the Bolshevik revolution. His later change of mind isfrom “The Fight to Overcome the Fuel Crisis,” “The Role and Functions ofthe Trade Unions Under the New Economic Policy,” “Five Years of theRussian Revolution and the Prospects of the World Revolution,” and “NinthCongress of the Russian Communist Party (Bolsheviks),” all quoted fromVolume II, Part 2 of the 1952 edition of Selected Works by V. I. Lenin,published in Moscow by the Foreign Languages Publishing House. On themisallocation of gasoline, see “The Gas Lines of ‘79,” The Public Interest,Summer 1980, page 47; “Gas Crisis: Experts Find Mixture of Causes,” NewYork Times, June 24, 1979, pages 1 and 22; “U.S. to Allow Shift of Some GasStocks to Urban Sections,” New York Times, June 30, 1979, pages 1 and 16.On the lack of gasoline shortages in the United States during the 1967 Araboil embargo, see Thomas W. Hazlett, TV Coverage of the Oil Crises, VolumeIII, pages 14 and 15. The dire predictions that ending price controls on oilwould cause skyrocketing gasoline prices were quoted in “Snake OilSalesmen,” Policy Review, Summer 1986, pages 74 to 77, passim. Ongasoline prices reaching an all-time low, see “Gas is Cheap, But Taxes areRising,” Consumers’ Research, August 1994, pages 28 and 29. The fact thataverage per-capita incomes in counties where Costco stores are located arehigher than average per-capita incomes in counties where Wal-Mart storesare located is from page 119 of The Wal-Mart Revolution: How Big-BoxStores Benefit Consumers, Workers, and the Economy by Richard Vedder andWendell Cox. The founding of the Bank of Italy was discussed on page 28of A.P. Giannini: Banker of America by Felice A. Bonadio.

CHAPTER 6: THE ROLE OF PROFITS— AND LOSSES

The epigraph is from page 251 of Give Me a Break by John Stossel. Thereport on the competition between Wal-Mart and Kroger is from page B1of the Wall Street Journal of May 27, 2003, under the title “Price War in

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Aisle 3.” The fact that the price of groceries declines by 6 to 12 percent incommunities where Wal-Mart sells groceries was reported on page 215 ofThe Best-Laid Plans by Randal O’Toole. John Dewey’s comment aboutprofit is from page 555 of Volume 2 of his book Characters and Events:Popular Essays in Social and Political Philosophy. Soviet Premier LeonidBrezhnev’s comment that Soviet managers shied away from innovation “asthe devil shies away from incense” was quoted on page 437 of a paper byJoseph S. Berliner titled “Prospects for Technological Progress” in a 1976publication by the Joint Economic Committee of Congress titled SovietEconomy in a New Perspective. Information and comments on theAmbassador automobile in India are from The Economist of September 11,1999, under the title “Free to Be Poor” and from page 14 of the December30, 1997 issue of the London newspaper The Independent. The story of themicrochip, including Intel’s risking its corporate survival for the sake ofresearch, was discussed on pages 247, 248, 254, 259 to 262 of Forbes GreatestBusiness Stories of All Time, edited by Daniel Gross, et al. The competitionbetween Intel and AMD was described on page 70 of the November 24,2007 issue of The Economist, in an article titled “Oil Money and Hafnium.”Advanced Micro Device’s billion-dollar losses while trying to gain marketshare from Intel were reported on pages 66 and 67 of the March 10, 2003issue of BusinessWeek. The decline in Intel’s stock in 2006 was shown onpage A1 of the Wall Street Journal of April 28, 2006 in an article titled “IntelPromises Sweeping Overhaul Amid PC Slowdown, Rival’s Gains.”Announced layoffs of 1,000 Intel managers was reported on page C2 of theNew York Times of July 14, 2006 in an item titled “Intel to Lay OffManagers.” The 57 percent decline in Intel’s profits while AMD’s profitsrose 53 percent was reported on page A11 of the Wall Street Journal of July21, 2006 under the title “Price War Weighs on AMD’s Results.” Thequotation from the dean of the Yale School of Management is from page 26of the April 11, 2005 issue of BusinessWeek. The fact that 120 out of the top500 companies in America made losses in 2002 was reported on page 199of the April 14, 2003 issue of Fortune magazine under the title “Honey, IShrunk the Profits.” The increased competition in India’s automobilemarket in the late twentieth century was described on pages 5 and 6 of an

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article titled “Make Us Competitive— But Not Yet,” in a special section onIndia in the February 22, 1997 issue of The Economist. Data on corporateprofit rates are from page 7 of the May 2006 issue of the Survey of CurrentBusiness, in an article titled “Note on the Returns for DomesticNonfinancial Corporations in 1960–2005.” The fact that Wal-Mart has afaster rate of inventory turn over than Target is from page 69 of The Wal-Mart Revolution by Richard Vedder and Wendell Cox. Information on theaverage time automobiles spent on dealer lots before being sold is from pageB1 of the January 12, 2009 issue of the Wall Street Journal, in an article titled“Inventory Traffic Jam Hits Chrysler.” The fact that Fortune 500 companiesaveraged just pennies of profit on each dollar of revenue is from page 197 ofthe April 14, 2003 issue of Fortune under the title “Honey, I Shrunk theProfits.” Higher price markups and lower profit rates in ghetto businesseswere discussed on page 31 of The State Against Blacks by Walter E.Williams. Data on the time required to manufacture a Model T Ford in theearly twentieth century, and the fact that the price of this car was cut in halfbetween 1910 and 1916 are from pages 62 and 161 of Global Capitalism byJeffry A. Frieden. Data on economies and diseconomies of scale in theautomobile and beer industries are from pages 76, 77, 131 and 145 of TheStructure of American Industry, ninth edition, by Walter Adams and JamesBrock. The statistic that the largest manufacturer of automobiles in theUnited States in the early twentieth century produced just six cars a day isfrom The American Car Dealership by Robert Genat, page 7. Diseconomiesof scale in banking were discussed on page 4 of a special supplement sectionof the May 20, 2006 issue of The Economist titled “Thinking Big.” The risksthat result when organizations become too large in scale and complexitywere mentioned on page R3 of the October 26, 2009 issue of the Wall StreetJournal, under the headline “Too Big to Manage?” The survey of airlinequality was published in the May 14, 2001 issue of BusinessWeek on page 14.The statement that larger airlines are more likely to lose passenger luggageis from page D1 of the September 2, 2008 issue of the Wall Street Journal,in an article titled “Why Your Bags Aren’t Better Off on a Big Airline.”Specialty hospitals and large hospitals were discussed on pages 86 to 98 ofthe March 10, 2008 issue of Forbes, under the title “Bad Medicine.” The

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quotation from the Indian entrepreneur is from page 266 of India Unboundby Gurcharan Das. The fact that Soviet farms were ten times the size ofAmerican farms and employed more than ten times as many people is frompage 117 of The Turning Point by Nikolai Shmelev and Vladimir Popov.Other data and comments on the efficiency of Soviet enterprises are frompages 119 and 122 of the same book. The practices of Soviet tractor driverswere discussed on page 184 of The Age of Delirium: The Decline and Fall ofthe Soviet Union by David Satter. Howard Johnson’s pioneering in restaurantfranchising was discussed on page 51 of Fast Food: Roadside Restaurants inthe Automobile Age by John A. Jakle and Keith A. Sculle. Discount prices bycruise lines with excess capacity were discussed on pages D1 and D2 of theOctober 29, 2003 issue of the Wall Street Journal under the title “LuxuryCruises at Discount Prices.” A news story about fancy hotels renting roomsfor less than the price at more modest hotels was in the Wall Street Journalof July 19, 2001, on page B1, under the title “Deluxe Travel at DiscountPrices.” A similar story appeared in the same newspaper on August 10,2001, pages W1 and W9, under the title “Peak Season, Off-Peak Prices.”The rebound of prices in 2004, when there were fewer empty hotel rooms,was discussed in a story beginning on page D1 of the July 6, 2004 issue ofthe Wall Street Journal under the title “Hotels Raise Prices As Travel PicksUp.” The discussions and analysis of middlemen in West Africa are frompages 22 through 27 of West African Trade by P.T. Bauer. Soviet enterprises’tendency to make things for themselves, rather than get them fromspecialized producers, was discussed on page 135 of The Red Executive byDavid Granick. Chinese firms that supplied their own transportationservices were discussed on pages 28 to 31 of the Far Eastern EconomicReview of July 25, 2002 under the title “The Perils of Delivering theGoods.” The huge inventories in the Soviet Union, compared to those inJapan or the United States, were discussed on pages 133 to 137 of TheTurning Point by Shmelev and Popov. The high levels of inventory carriedin some sub-Saharan African regions were discussed on page 14 of WestAfrican Trade by P.T. Bauer. The Soviet official who complained about a lackof tires for their motor vehicles was quoted on page 83 of The Wisdom ofHenry Hazlitt.

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CHAPTER 7: BIG BUSINESS AND GOVERNMENT

The epigraph is from page 171 of Economic Sophisms by Frédéric Bastiat.The fact that mutual funds opposed the efforts of shareholder activists tolimit executive compensation was reported on page C5 of the June 12, 2007issue of the San Francisco Chronicle, in an article titled “Yahoo May Not BeNo. 1, But CEO’s Pay Package Is.” Information about the powers grantedto corporate shareholders in the United Kingdom is from page A17 of theSeptember 27, 2007 issue of the Wall Street Journal, under the headline“Corporations Shouldn’t Be Democracies.” Information on the world’s 30largest corporations, including the fact that 13 of these corporations areAmerican, can be found on the same page. The fact that the averagecompensation for America’s top CEOs rose to over $8 million in 2006 wasreported on page C5 of the June 12, 2007 issue of the San FranciscoChronicle, in an article titled “Yahoo May Not Be No. 1, But CEO’s PayPackage Is.” The fact that private equity firms offer higher compensationpackages to their chief executives than public companies do is from pagesA1 and A16 of the January 8, 2007 issue of the New York Times, in an articletitled “Private Firms Lure C.E.O.’s with Top Pay.” Nineteenth-centurycartels in the railroad industry were discussed on page 33 of the December31, 2007 issue of Barron’s, in an article titled “Contrivances to Raise Prices.”The government of India’s restrictions on businesses’ output were discussedon pages 99, 174 and 175 of India Unbound by Gurcharan Das. Thediffering costs of producing electricity to run a dishwasher at different timeswere discussed on page 112 of the March 26, 2001 issue of BusinessWeek, ina column titled “How to Do Deregulation Right.” Riots in India overelectricity rates were mentioned on page 46 of an article titled “ImpossibleIndia’s Improbable Chance” in the book The World in 2001, published by theBritish magazine, The Economist. Data on the trucking industry are frompages 435 and 436 of an article titled “Trucking Deregulation” in TheFortune Encyclopedia of Economics, edited by David Henderson. Data onairlines are from pages 379, 380 and 381 of an article in the same book byAlfred E. Kahn titled “Airline Deregulation.” The decline of air fares afterEuropean airlines were deregulated was discussed on pages 44 and 45 of the

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May 8, 2006 issue of BusinessWeek in an article titled “A Closer Continent.”The statement that large retailers such as Wal-Mart and Target exert their“power” to “force” suppliers to sell to them at lower prices is from page F1of the August 19, 2007 issue of the San Francisco Chronicle, in an articletitled “Retail Starting to Turn Green.” The U.S. Supreme Court anti-trustcases referred to included, respectively, Federal Trade Commission v. MortonSalt Co. (1948), Standard Oil Co. v. Federal Trade Commission (1951), UnitedStates v. Borden Co. (1962), Brown Shoe Co. v. United States (1962), UnitedStates v. Von’s Grocery Company (1966). United States v. Aluminum Co. ofAmerica (1945) was decided by the 2nd Circuit Court of Appeals. Thefinancial asset restrictions under India’s Monopolies and Restrictive TradePractices Act were discussed on page 169 of India Unbound by GurcharanDas. The division of air and rail traffic between Madrid and Seville wasshown on page 267 of Industries in Europe, edited by Peter Johnson. Dataon the division of Transatlantic passengers between ocean liners andairplanes is from page B4 of the October 2, 2003 issue of the Wall StreetJournal, in an article beginning on page B1, under the title “Cunard’s GrandGamble.” The city of Munich’s switching its computers from usingMicrosoft Windows to using Linux was reported in The Times of London(online edition) under the headline “Need to Know.” The New York Timeseditorial in defense of a European antitrust ruling against Microsoft can befound on page A18 of the September 21, 2007 issue under the title“Regulating Microsoft.” Details on the injunction sought by the FTCagainst Whole Foods Market’s acquisition of Wild Oats Markets in 2007are from Federal Trade Commission v. Whole Foods Market, Inc., and WildOats Markets, Inc., United States District Court for the District ofColumbia, August 16, 2007, pages 1 to 4, 74, 81, 84, 85, 87, 88. The shiftfrom petroleum oil to corn oil for making plastics was discussed on page B1of the Wall Street Journal of October 12, 2004 under the title “One Word ofAdvice: Now It’s Corn.” The economic effects of India’s Monopolies andRestrictive Trade Practices Act and its repeal in 1991 were discussed inIndia Unbound, pages 159 to 170, 183 to 184, 220, 263 to 264. Thediscussion of the effect on India’s largest company, Tata Industries, is basedon information from an article in the February 14, 2005 issue of Forbes

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magazine titled “Tempest in a Teapot,” beginning on page 118. The fact thatanalysts confirmed in 2007 that India’s Tata Steel was the lowest-cost steelproducer in the world was reported on page C5 of the May 17, 2007 issueof the Wall Street Journal, in an article titled “Indian Steelmakers GainStrength.”


The epigraph is from page 241 of The Seven Fat Years by Robert L.Bartley. The remark about capitalist business from Karl Marx and FriedrichEngels is from page 11 of their “Manifesto of the Communist Party,”published in Basic Writings on Politics and Philosophy, edited by Lewis S.Feuer. Marx’s comments about the role of systemic characteristics incapitalism are from page 15 of Volume I of Capital, in the edition publishedin 1919 by Charles H. Kerr & Co. Examples of the kinds of detailedinformation about hotel services and amenities provided by trade associationdata can be found in 2001 Lodging Survey: Lodging Services, Facilities, andTrends, published by the American Hotel & Lodging Association inWashington, D.C. Data on American profits as a percentage of nationaloutput (Gross Domestic Product) are from page 65 of The Economist ofDecember 8, 2001, under the title “What Doth It Profit?” Data on theheight differential between North Koreans and South Koreans can be foundon pages 51 to 55 of a study titled “Height and Weight Differences BetweenNorth and South Korea,” from the January 2009 issue of Journal of BiosocialScience. The effects of competition from private-sector couriers on thegovernment-run postal service in India were described on page A1 of theOctober 3, 2006 issue of the Wall Street Journal, in an article titled “AsEconomy Zooms, India’s Postmen Struggle to Adapt.” The success ofGerman firms in the international export market was reported on pages B1and B2 of the February 27, 2010 issue of the New York Times, in an articletitled “German Skill in Exporting Puts Pressure on Neighbors.” Thequotation about service differences in India is from page 112 of IndiaUnbound by Gurcharan Das and the comment on India’s bank tellers is from

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of a supplement to The Economist of February 22, 1997, titled “ASurvey of India: Time to Let Go.” The emergence of private banking inIndia was reported on page A12 of the October 3, 2006 issue of the WallStreet Journal, in an article titled “As Economy Zooms, India’s PostmenStruggle to Adapt,” which began on page A1. The McDonald’s practice ofmaking unannounced inspections of the suppliers of its hamburger meat isfrom pages 130 and 131 of McDonald’s: Behind the Arches, 1995 revisededition, by John F. Love. Ray Kroc’s insistence on stringent cleanlinessinside, outside and around each restaurant was detailed on pages 142 to 144,147 and 184. Henry J. Heinz’s competitive advantages from sellingunadulterated horseradish were discussed on pages 52 and 53 of Brand New:How Entrepreneurs Earned Consumers’ Trust from Wedgwood to Dell byNancy F. Koehn. Efforts to protect the personal information of credit cardusers were reported on page B1 of the March 24–25, 2007 issue of the WallStreet Journal, in an article titled “Card Companies Crack Down onRestaurants.” The fact that many fast-food restaurants have higher qualityand safety standards than the U.S. Department of Agriculture was reportedon page 1A of the December 9, 2009 issue of USA Today, under the headline“Schools Don’t Meet Fast-Food Standards.” Woolworth’s early travails wererecounted in the first three chapters of Remembering Woolworth’s by KarenPlunkett-Powell. The story of the executive who lost her job andsubsequently had to sell some of her stock, but who still owned a seventeen-acre estate and had $1 million in savings, is from pages 120 and 122 of thebook The Disposable American by Louis Uchitelle.

CHAPTER 9: PRODUCTIVITY AND PAY

The epigraph is from page 149 of The Wisdom of Henry Hazlitt.Comparisons of labor productivity in Japanese-owned and Chinese-ownedcotton mills in China are from page 47 of The Rise of “The Rest” by AliceAmsden. Comparisons of American-owned manufacturing firms in Britainand British-owned manufacturing firms were made on page 52 of theOctober 12, 2002 issue of The Economist under the title, “Blame the Bosses.”

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Higher labor productivity in South African firms than in firms in someother countries was mentioned on page 51 of the January 14, 2006 issue ofThe Economist under the title “Spend More but Wisely.” Information aboutinternational productivity levels is from page 5 of the study Key Indicators ofthe Labour Market, fifth edition, published by the International LabourOffice in Geneva. Data on Americans’ changing incomes between 1975 and1991 are from page 8 of the 1995 Annual Report of the Federal ReserveBank of Dallas. Earlier studies indicating similar patterns include Years ofPoverty, Years of Plenty by Greg Duncan et al. The three-year Census studythat found only 2.4 percent of the population living in poverty in all 36months of the study was discussed on page 4 of “Income, Poverty, andHealth Insurance Coverage in the United States: 2007,” Current PopulationReports, P60–235. Similar changes in individual incomes in westernEuropean countries were reported on page 5 of Poor Statistics: Getting theFacts Right About Poverty in Australia by Peter Saunders, published in April2002 by the Centre for Independent Studies in Sydney, Australia. Similardata on incomes in Britain and New Zealand were reported on pages 32 and33 of Poverty and Benefit Dependency by David Green, published in 2001 bythe New Zealand Business Roundtable, and similar data from Canadaappeared in an article titled “Time Reveals the Truth about Low Income,”which appeared on pages 24 to 26 of the September 2001 issue of FraserForum, published by the Fraser Institute in Vancouver, Canada. Data onAmerican household incomes in 2001 are from page 16 of Section 4 of theJanuary 12, 2003 issue of the New York Times in an article titled “Definingthe Rich in the World’s Wealthiest Nation,” beginning on page 1 of thatsection. Changes in the composition of the 400 richest Americans are frompage 80 of the September 30, 2002 issue of Forbes magazine in an articletitled “The March of the 400.” The fact that the share of the wealthiest 400people on the Forbes list who inherited their wealth declined from 21percent in 1982 to 2 percent in 2006 was reported on page 4 of the April 4,2009 issue of The Economist, in a special section titled “Spare a Dime?” Thedata showing 64 million people in the top 20 percent of Americanhouseholds and 39 million in the bottom 20 percent are from page 11 ofIncome Inequality: How Census Data Misrepresent Income Distribution by

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Robert Rector and Rea S. Hederman, published by the Heritage Foundationin Washington. The misleading claim that income quintiles divide thecountry into five equal parts was made on page 48 of Economics Explainedby Robert Heilbroner and Lester Thurow. Data on numbers of heads ofhousehold working in high-income and low-income households in 2000 arefrom Table HINC–06 from the Current Population Survey, downloadedfrom the Bureau of the Census web site. The fact that the top 10 percent ofAmerican income earners worked less than the bottom 10 percent in the latenineteenth century, and just the reverse in the early twenty-first century isfrom page 92 of Saving Capitalism from the Capitalists by Raghuram Rajanand Luigi Zingales. The fact that a large share of high-income earners workin excess of 50 hours a week was reported on page 51 of “Extreme Jobs: TheDangerous Allure of the 70-Hour Workweek,” published in the December2006 issue of the Harvard Business Review. The fact that from 1969 to 1996median household income rose by only 6 percent while per capita incomerose by 51 percent is from page 1 of “Changes in Median HouseholdIncome: 1969 to 1996,” Current Population Reports, P23–196. Data on theincrease in median household income from 1967 to 2007 are from page 5 of“Income, Poverty, and Health Insurance Coverage in the United States:2007,” Current Population Reports, P60–235, while data on the increase inper capita disposable income over that same span of time are from page 367of The Economic Report of the President, 2010 edition. The rate of increase inhousehold formation in the United States during the twentieth century wasreported on page 7 of Income Distribution in the United States by Herman P.Miller. The misguided remark from the Washington Post is from page 34 ofits September 7, 1998 national weekly edition, in an article titled “The RichGet Richer, and So Do the Old.” The fact that 3.5 percent of Americanhouseholds have a net worth of one million dollars or more, and that 80percent of American millionaires inherited nothing, is from page 3 of TheMillionaire Next Door by Thomas J. Stanley and William D. Danko. Thefact that the real income of those who had been in the bottom 20 percent in1975 was by 1991 higher than the real income of the average American in1975 is from page 14 of the 1995 Annual Report of the Federal ReserveBank of Dallas. The falling income share and rising real income of

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households in the bottom 20 percent was documented on page 19 of MoneyIncome in the United States: 2001, which is one of the Current PopulationReports, number P60–218, published by the Census. Data on the increase inincome from 1975 to 1991 for those individuals in the bottom and topincome quintiles was shown on page 8 of the 1995 Annual Report of theFederal Reserve Bank of Dallas. Data from the Internal Revenue Serviceshowing a near 91 percent increase in income from 1996 to 2005 for thoseindividuals in the lowest income quintile and a near 26 percent decrease forthose in the top 1 percent during that same span of time can be found onpage A24 of the November 13, 2007 issue of the Wall Street Journal, underthe title “Movin’ On Up.” The fact that the top one percent of incomeearners in 2005 earned $365,000 and up was reported in a press releaseissued by Congressman Jim Saxton on October 15, 2007 titled “Top OnePercent of Tax Filers Pay Highest Share in Decades.” The fact that morethan half of those in the top 1 percent of income in 1996 were no longer atthat level in 2005, and that only 25 percent of those who began in the top1/100 of one percent remained at that level during that span of time, is frompages 2 and 4 of “Income Mobility in the U.S. from 1996 to 2005,”published by the U.S. Department of the Treasury on November 13, 2007.The fact that hundreds of thousands of families with incomes lower than$20,000 per year were living in homes costing $300,000 and up is from page16 of Myths of Rich & Poor by W. Michael Cox and Richard Alm. Theupward shift in the peak earning years during the last half of the twentiethcentury was reported on page 16 of the 1995 Annual Report of the FederalReserve Bank of Dallas. The number of Americans working in the SovietUnion is from page 11 of The Turning Point by Nikolai Shmelev andVladimir Popov. The fact that single women who worked continuouslyearned slightly more than single men who did the same is from page 105 of“The Economic Role of Women,” The Economic Report of the President,1973. The differences between the earnings of women with and withoutchildren are from page 15 of a valuable compendium of data on women inthe economy titled Women’s Figures, 1999 edition, written by DianaFurchtgott-Roth and Christine Stolba and published by the AmericanEnterprise Institute. Data on male predominance in work-related deaths are

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from the same source, page 33. Comparison of the incomes of black, white,and Hispanic males of the same age and IQ are from page 323 of The BellCurve by Richard Herrnstein and Charles Murray. The comparison of theincomes of Maoris with those of other New Zealanders of comparable age,skill, and literacy was discussed on pages 43 and 44 of Poverty and BenefitDependency by David Green. Violations of apartheid laws by employers inSouth Africa were discussed on pages 152 and 153 of Capitalism andApartheid by Merle Lipton. Violations of these laws by home builders inJohannesburg were discussed on page 164 of Apartheid: A History by BrianLapping. Violations of the residential aspects of the apartheid laws werediscussed on pages 112 and 113 of South Africa’s War Against Capitalism byWalter E. Williams— a black American economist who himself violatedthese laws by living in an area set aside for whites. The round-the-clock useof trucks in mid-twentieth century West Africa was discussed on pages 14and 15 of West African Trade by P.T. Bauer. The international sales of usedcars from Japan was discussed in a front page story in the January 8, 2004issue of the Wall Street Journal, under the title, “How Japan’s Second-HandCars Make Their Way to Third World.” Taxis in Cameroon were mentionedon page 179 of The Undercover Economist by Tim Harford. The 2.6 milliontons of electronic waste discarded by Americans in 2005 was reported onpage D2 of the November 1, 2007 issue of the Wall Street Journal, in anarticle titled “When to Fix— or Ditch— an iPod.” Data on the average lifeof capital equipment in the Soviet Union and in the United States are frompages 145 and 146 of The Turning Point by Nikolai Shmelev and VladimirPopov.

CHAPTER 10: CONTROLLED LABOR MARKETS

The epigraph is from page 11 of The Myth of the Rational Voter by BryanCaplan. Data on the unemployment rate in South Africa and the commentson it are from page 49 of the May 28, 2005 issue of The Economist under thetitle “Unions v Jobs” and on page 4 of a special section titled “Survey ofSouth Africa” in an article titled “Chasing the Rainbow” in the April 8, 2006

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issue of The Economist. The fact that the average American has nine jobsbetween the ages of 18 and 34 is from page 79 of Saving Capitalism from theCapitalists by Raghuram G. Rajan and Luigi Zingales. The EuropeanUnion countries’ lower rates of job creation and higher rates ofunemployment than in the United States were documented on page 50 ofthe June–September 2005 issue of Italy’s Banca Nazionale del LavoroQuarterly Review in an article titled “The Economists’ ‘Manifesto’ OnUnemployment in the EU Seven Years Later: Which Suggestions StillHold?” The rioting of French students over a weakening of job security lawswas reported on page A18 of the March 14, 2006 issue of the Wall StreetJournal under the title “Les Misérables.” The fact that only about twopercent of American workers age 25 and over earn minimum wages is froma U.S. Department of Labor publication titled Characteristics of MinimumWage Workers: 2004. The unemployment rate in Switzerland in February2003 was reported on page 100 of the March 15, 2003 issue of TheEconomist. The data from the Wall Street Journal about the unemploymentrate in Hong Kong in 1991 is from page C16 of the January 16, 1991 issue.New government-mandated benefits for workers in Hong Kong after Chinatook control were mentioned on page 45 of Country Commerce: Hong Kong,a report released in December 2002 by The Economist Intelligence Unit,based in New York and affiliated with the London magazine, TheEconomist, while the higher unemployment rates that followed werementioned on page 13 of the March 20, 2003 issue of the Far EasternEconomic Review, under the title “Hong Kong Solutions.” The record highunemployment rate for Hong Kong in 2003 was reported on page A14 ofthe Wall Street Journal of June 18, 2003. The effect of Europe’s government-mandated worker benefits on unemployment was discussed on page 39 ofThe Economics of Life by Gary Becker and Guity Nashat Becker. The factthat the hourly compensation of manufacturing employees is higher in theEuropean Union than in the United States and Japan is from page 41 of theNovember 2006 issue of the Monthly Labor Review, in an article titled“Labor Costs of Manufacturing Employees in China: An Update to2003–04.” Comparisons of Canadian minimum wages and unemploymentrates with those of the United States are from a monograph titled

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Measuring Labour Markets in Canada and the United States: 2003 Edition byJason Clemens et al., published by the Fraser Institute. Information aboutminimum wage earners, including their living arrangements and the factthat the average family income of minimum wage earners exceeded $44,000in 2008, is from page A14 of the July 25, 2008 issue of the Wall StreetJournal , under the headline “Bad Law, Worse Timing.” The effects of “livingwage” laws in various American cities were discussed in the July 2005 issueof California Economic Policy, in an article titled “A Decade of LivingWages: What Have We Learned?” Conflicting studies of the employmenteffects of minimum wages were discussed in an article titled “Employmentand the 1990–1991 Minimum-Wage Hike,” in the May 1995 issue of theAmerican Economic Review. The views of economists from various countrieson the effects of minimum wage laws were mentioned on pages 32 to 34 ofWhat Future for New Zealand’s Minimum Wage Law?, based on a study doneby ACIL Economics and Policy, Pty. Ltd., and published by the NewZealand Business Roundtable. The conclusion that minimum wage lawsreduce the employment opportunities of low-skilled workers was stated onpage 123 of Working Paper 12663 titled “Minimum Wages andEmployment: A Review of Evidence from the New Minimum WageResearch,” published by the National Bureau of Economic Research inNovember 2006. The denial by South African labor unions that highunemployment was due to South Africa’s labor laws is from page 49 of theMay 28, 2005 issue of The Economist in a news item titled “Unions v Jobs.”The 17.3 percent unemployment rate for workers aged 18 to 24 in Britainin 2008 was reported on page 53 of the July 18, 2009 issue of The Economist,in an article titled “No Way to Start Out in Life.” A criticism of a studywhich claimed to “refute” the “myth” that minimum wages foster increasedunemployment was published in the May 1995 issue of the AmericanEconomic Review under the title “Employment and the 1990–1991Minimum-Wage Hike.” The fact that ACORN has sought exemptionsfrom minimum wage laws for its employees was reported on page A20 ofthe January 16, 2007 issue of the Wall Street Journal , under the title “Pelosi’sTuna Surprise.” The conclusion that minimum wages in Brazil did notprovide economic gains to low-income families is from pages 157 and 158

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of Volume 80 of the Journal of Development Economics (2006), in an articletitled “The Effects of the Minimum Wage in Brazil on the Distribution ofFamily Incomes: 1996–2001.” Information about long-term unemploymentin Germany and the United States is from page 105 of the June 23, 2007issue of The Economist , under the heading “Long-Term Unemployment.”The effects of informal minimum wages in West Africa were discussed onpages 18 and 19 of West African Trade, by P. T. Bauer of the London Schoolof Economics. A similar situation in South Africa was described on page A3of the New York Times of March 13, 2004, under the title “Low LaborStandard Leads South Africans to Export Jobs.” The fact that South Africa’sminimum wage law has led employers to use more capital per worker is frompage 51 of the January 14, 2006 issue of The Economist in an article titled“Spend More but Wisely.” The elimination of low-skill jobs such as parkingattendant, bellhop and doorman from European hotels was reported onpage 3 of Working Paper 12581 titled “Technology and Labor Regulations,”published by the National Bureau of Economic Research in October 2006.Additional information is from page 28. The effect of minimum wages inreducing the employment of workers in general in various countries, and theemployment of younger and less skilled workers in particular, was discussedon pages xvi, xvii, 23, 24, 33 to 35, 45 of What Future for New Zealand’sMinimum Wage Law?, cited above. Conclusions for the United States arefound in Youth and Minority Unemployment, written by Walter E. Williamsand published by the Hoover Institution. The difference between total andyouth unemployment in France was shown on a graph on page 11 of aspecial supplement on France in the November 16, 2002 issue of TheEconomist under the title “A Divided Self: A Survey of France.” Theunemployment rates for young workers in Belgium and Italy are from pageA13 of the January 19, 2005 issue of the Wall Street Journal in a columntitled “Shall We Eat Our Young?” Unemployment rates for young workersin the European Union in 2009 are from page B4 of the New York Times ofJanuary 1, 2010, in an article beginning on page B1, under the title “Young,Down and Out in Europe.” The comparison of the youth unemploymentrate in Australia over a twenty-year span with the unemployment rate forthe population in general was reported on page 110 of State of the Nation,

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edited by Jennifer Buckingham, and published in Australia by The Centrefor Independent Studies. The fact that Australia’s minimum wage level isnearly 60 percent of that country’s median wage rate was reported on page8 of the Spring 2007 issue of Policy, Vol. 23, No. 3, in an article titled “WhoIs the Fairest of Them All?” The use of minimum wage laws to promoteracial discrimination was discussed on page 14 of Youth and MinorityUnemployment by Walter Williams, Hoover Institution edition, and onpages 49 and 50 of The Japanese Canadians by Charles H. Young and HelenR. Y. Reid. Data on the changing ratio of black unemployment to whiteunemployment in the wake of minimum wage laws are from page 103 ofOnly One Place of Redress by David E. Bernstein. The growing gap inunemployment levels between white and black teenagers beginning in the1950s was shown on a graph on page 98 of the book The Unheavenly City,1968 edition, by Edward C. Banfield. The effects of minimum wages on theemployment of black teenagers were discussed extensively in Youth andMinority Unemployment by Walter E. Williams. The fact that theunemployment rate among black teenagers reached 40 percent in the wakeof the downturn in the American economy was reported on page 26 of theAugust 22, 2009 issue of The Economist, in an article titled “Left Behind.”The collapse of organized attempts of white employers and landowners tohold down the pay of black farmers in the American South after the CivilWar, and of Japanese immigrant farmers and farm workers in California ageneration later, were covered in Competition and Coercion: Blacks in theAmerican Economy 1865–1914 by Robert Higgs, especially on pages 47 to49 and in Robert Higgs, “Landless by Law: Japanese Immigrants inCalifornia Agriculture to 1941,” Journal of Economic History, March 1978,pages 207 to 209. Data on American automobile production andemployment are from page 13 of Motor Vehicle Facts & Figures: 1997,published by the American Automobile Manufacturers Association, andfrom pages 19, 20 and 22 of an article titled “Auto Industry Jobs in the1980s: A Decade of Transition,” which appeared in the U. S. Department ofLabor’s Monthly Labor Review for February 1992. The growing share ofJapanese-brand automobiles built in the United States was reported on page9 of the report Driving a New Generation of American Mobility, a

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publication of the Japan Automobile Manufacturers Association. Thequotation from the New York Times about unions reining in their demandsin the automobile industry is from a front-page article in the September 20,2003 issue. Data on the decline of unionization is available from manysources, one being an article titled “Labor’s Gains Undercut by LingeringProblems,” which appeared in the Detroit News of July 26, 1999. Thedecline in private-sector union membership was shown on a graph on thefront page of the August 1, 2008 issue of the Wall Street Journal, under theheadline “Wal-Mart Warns of Democratic Win.” The amount of hours oflabor used per automobile produced by American and Japanese auto makersis from page 69 of the April 21, 2003 issue of BusinessWeek magazine in anarticle beginning on page 68 and titled, “Pick Me as Your Strike Target! No,Me!” The quotation about the effect of an economic slump in Europe incausing employee benefits to erode was quoted from page A8 of the July 24,2006 issue of the Wall Street Journal, in a news story beginning on the frontpage, under the title “More Flexibility by Europe’s Labor Stokes aRecovery.” The additional $250 expense per car that results from the BigThree Detroit auto makers’ work rules was reported on the front page of theMarch 2, 2007 issue of the Wall Street Journal, in an article titled “Desperateto Cut Costs, Ford Gets Union’s Help.” The increase in overtime work bymanufacturers in 2009 was reported on page A3 of the November 27, 2009issue of the Wall Street Journal, under the title “Overtime Creeps BackBefore Jobs.” The benefits awarded to juvenile (under 18 years of age)workers in the Soviet economy were described on page 234 of The SovietEconomy by Alec Nove. The comment about child labor laws is from page42 of Give Me a Break by John Stossel. Data on the annual hours worked inFrance, Japan, and the United States are from page 58 of the October 27,2003 issue of BusinessWeek magazine under the title “Give This Policy theGuillotine.” Information on laws mandating paid vacations and paidholidays in France is from an article titled “Working Hard or HardlyWorking?” in the November 16, 2004 issue of the Wall Street Journal(online). The fact that in 2005 the average European worker took 11.3 daysof sick leave from work, while the average American worker missed just 4.5days was reported on page A6 of the January 9, 2009 issue of the Wall Street

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Journal, in an article titled “Belgians Take Lots of Sick Leave,” which beganon page A1. The New York Times report about working conditions inCambodia is from page A19 of the January 14, 2004 issue of that newspaperin a column titled “Inviting All Democrats.” Rising wage rates andimproving working conditions in China as a result of increasing competitionfor workers by multinational companies there are from pages 32 and 34 ofthe March 27, 2006 issue of BusinessWeek in an article titled “How RisingWages are Changing the Game in China.” The higher rates of pay inChina’s Guangdong province, driven by a five-year labor shortage, werereported on page 30 of the March 2008 issue of the Far Eastern EconomicReview, under the headline “Bye Bye Cheap Labor.” The nearly 18 percentincrease from 2002 to 2004 in total hourly compensation of manufacturingemployees in China was reported on page 42 of the November 2006 issue ofthe Monthly Labor Review, in an article titled “Labor Costs ofManufacturing Employees in China: An Update to 2003–04.”


The epigraph from Peter Bauer is from page 23 of his book Equality, theThird World, and Economic Delusion. The increased use of power looms inIndia’s silk weaving industry was reported on page 40 of the January 10,2009 issue of The Economist, in an article titled “Looming Extinction.”International data on poverty and inequality are from pages 69 to 71 of theMarch 13, 2004 issue of The Economist in a feature article titled “More orLess Equal?” The decrease in the share of the world population living inextreme poverty from 1990 to 2005 was reported on page 101 of the April25, 2009 issue of The Economist, under the heading “Poverty.” The declinein poverty in recent years in India and China, as measured by the fall in theshare of population living on less than $1 per day, was reported on page 36of the August 11, 2007 issue of The Economist, in an article titled “ForWhosoever Hath, to Him Shall Be Given, and He Shall Have More.” Thehigher rate of poverty in Italy and the Netherlands compared to the UnitedStates was shown on page 141 of The Illustrated Guide to the American

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Economy, third edition, written by Herbert Stein and Murray Foss. The factthat most Americans living in official poverty have air conditioning, colortelevision, a microwave oven, and a motor vehicle can be found on page 67of Income and Wealth by Alan Reynolds. The lack of hostility toward thewealthy in Britain was mentioned on page 66 of the October 21, 2006 issueof The Economist, under the headline “Always with Us.” The fact that privateequity firms offer higher compensation to the CEOs of the companies inwhich they are invested than CEOs of publicly owned companies is frompages A1 and A16 of the January 8, 2007 issue of the New York Times, in anarticle titled “Private Firms Lure C.E.O.’s with Top Pay.” Information onhow hiring standards and promotions policies can lead to entry-levelapplicants for work becoming artificially “unemployable” is from pages 158to 159 of Negro Employment in Public Utilities by Bernard E. Anderson.Information on China’s income inequalities is from pages 39 and 44 of theJune 2, 2001 issue of The Economist in an article titled “Income Distributionin China: To Each According to His Abilities.” Data on regional differencesin poverty rates in India are from page 7 of a special section on India in TheEconomist of June 2, 2001. The quotation about the consequences of thetransition from communist economies to market economies in Europe isfrom page 58 of the August 27, 2005 issue of The Economist under the title“Change and Decay.” The fact that most Americans living below the officialpoverty line owned a microwave oven and a videocassette recorder in 1994is from page 22 of the 1995 Annual Report of the Federal Reserve Bank ofDallas. The fact that poor New Zealanders own VCRs, freezers, washingmachines, and a vehicle was reported on page 32 of Poverty and BenefitDependency by David Green, published in 2001 by the New ZealandBusiness Roundtable. The estimate that a million Chinese per month wererising out of poverty is from page 3 of The Undercover Economist by TimHarford. The fact that 70 percent of the one thousand largest fortunes inBritain were earned rather than inherited was reported on page 65 of theOctober 21, 2006 issue of The Economist, under the headline “Always withUs.” The rise of India’s Dalit caste during the country’s recent economicexpansion was described on pages A1 and A12 of the June 23–24, 2007 issueof the Wall Street Journal, under the headline “Caste Away.” The stories of

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the great American fortunes created by Carnegie, Ford, Vanderbilt, etc., arewidely available in numerous books but the stories of similar individuals inIndia are from pages 187 to 195, 207 to 210, 246 to 248 of India Unboundby Gurcharan Das. Data on long-term unemployment in various countriesare from page A8 of the December 30, 2004 issue of the Wall Street Journal,in an editorial titled “That ‘Sluggish’ Economy.” The decline in theproportion of the non-institutional adult population with jobs was reportedon page A15 of the August 10, 2010 issue of the Wall Street Journal, underthe title “Unemployment: What Would Reagan Do?” Data on rates ofemployment in Iceland and France are from international comparisons onpage 74 of the September 20, 2003 issue of The Economist. Comparisons oflabor force participation rates among 55 to 64 year olds in Switzerland andin France are from page 11 of a special supplement to the November 16,2002 issue of The Economist, under the title “A Divided Self: A Survey ofFrance.” The fact that unemployed workers in the United States receivelower benefits for less time than unemployed workers in other nations isfrom page 22 of the January 3, 2009 issue of The Economist, in an articletitled “A Safety Net in Need of Repair.” The fact that unemployed workersin America spend more time per day looking for work than unemployedworkers in Germany, Britain, or Sweden is from page 23 of the same article.The generous unemployment benefits granted to workers in Norway andother European nations were shown on page 114 of the September 26, 2009issue of The Economist, under the heading “Unemployment Benefits.” Theuproar caused by the sewing machine in early nineteenth century France wasrecounted on page 92 of The Americans: The Democratic Experience byDaniel J. Boorstin. The quote from Adam Smith is from page lvii of his TheWealth of Nations, Modern Library edition. Child labor in Niger wasdiscussed on page 144 of the December 24, 2005 issue of The Economistunder the title “Child Labour.” The fact that nearly half the billionaires inthe world are in the United States is from page 132 of the March 17, 2003issue of Forbes magazine. See also page 116 of the March 27, 2006 issue ofForbes in an article titled “Billionaire Bacchanalia,” which is also the sourcefor the statement that vast regions of Africa are without a single billionaire.The fact that American corporations operated at a loss for two consecutive

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years during the Great Depression is from page 59 of Guide to EconomicIndicators, fourth edition, by Norman Frumkin. The financial lossessustained by Bill Gates, Warren Buffett and other billionaires as a result ofthe economic downturn in 2008 were reported on pages 84 to 87 of theMarch 30, 2009 issue of Forbes, in an article titled “Surveying the Damage.”The decrease in the number of millionaires worldwide, and the near 20percent decline in their net worth in the wake of the 2008 economicdownturn, was reported on page 89 of the July 4, 2009 issue of TheEconomist, under the heading “High-Net-Worth Individuals.” Greater wageinequality in the United States than in a number of other countries wasshown on page 6 of a monograph titled Wage Inequality by Francine D. Blauand Lawrence M. Kahn.

CHAPTER 12: INVESTMENT AND SPECULATION

The Economist magazine’s definition of investment is from page 72 of theMarch 4, 2006 issue, in an article titled “Getting a Grip on Prosperity.” Theexperiences of the Tata and Birla enterprises in India are from page 93 ofIndia Unbound by Gurcharan Das. The statement that businesses in Indiamust break laws in order to operate is from page 143 of the same book. Thenumerous government regulations in India were discussed on page 94.India’s freeing up its economy was discussed on page 29, and the risingforeign investment that followed was discussed on page 220. The fact thatdifferent groups within a given society tend to have qualitatively differenteducation can be seen by reading page 63 of Competing Equalities by MarcGalanter, page 80 of The Soviet Middle East by Alec Nove and J.A. Newth,page 173 of “The Dynamics of Ethnic Inequalities: The Case of Israel,” bySammy Smooha and Yochanan Peres in Volume I of Studies of Israeli Society,edited by Ernest Krausz, pages 125 to 146 of From Independence toStatehood, edited by Robert B. Goldmann and A. Jeyaratnam Wilson, andChapters 5, 6, and 7 of No Excuses by Abigail Thernstrom and StephanThernstrom. The fact that institutional investors worldwide owned $26trillion in investments at the end of the twentieth century is from page 149

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of Economics: Making Sense of the Modern Economy edited by Simon Cox.Information on the growing share of Americans who owned stock in the latetwentieth century is from pages 252 and 253 of The First Measured Centuryby Theodore Caplow, Louis Hicks, and Ben J. Wattenberg. The zero rate ofsavings by Canadians 30 years old and younger, and the negative rate ofsavings by Americans in the same age bracket, are from page 147 of theJune–September 2005 issue of the Italian journal Banca Nazionale delLavoro Quarterly Review in an article titled “Modigliani’s Life-CycleTheory of Savings Fifty Years Later.” Information on Western-owned banksin Eastern Europe is from a front-page story in the Wall Street Journal ofOctober 5, 2005, under the title “In Eastern Europe, Western Banks FuelGrowth, Fears.” The spread of international commodity market informationin India was described in a story beginning on the front page of the NewYork Times of January 1, 2004 titled “India’s Soybean Farmers Join theGlobal Village.” The disastrous speculation in silver by the Hunt brotherswas covered on pages 249 and 250 of The New York Times Century ofBusiness, edited by Floyd Norris and Christine Bockelmann. Thespeculation of Henry Heinz that led to bankruptcy was discussed on page321 of Brand New by Nancy F. Koehn. The prediction of The Economistmagazine that the price of oil was heading downward appeared on page 23of the March 6, 1999 issue under the title “The Next Shock?” The 2007disruption to Japanese auto production caused by the unavailability of pistonrings was reported on page B1 of the July 20, 2007 issue of the Wall StreetJournal, under the headline “A Key Strategy of Japan’s Car MakersBackfires.” The fact that the ratio of inventory to sales hit a record low inthe United States during the third quarter of 2003 was reported on page 42of the October 27, 2003 issue of BusinessWeek, in an article beginning onpage 40 with the title “Jobs: The Turning Point is Here.” The quotationfrom The Economist magazine about interest rates bringing savings andinvestment into balance is from page 8 of a supplement to its September 24,2005 issue titled “The Great Thrift Shift.” The fact that the value of paydayloans is usually between $300 and $400 was reported on page A3 of theAugust 9–10, 2008 issue of the Wall Street Journal, under the title “StatesImposing Interest-Rate Caps to Rein In Payday Lenders.” This article is

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also the source for the fact that three-quarters of Oregon’s payday lendersclosed down after the enactment of a 36 percent rate cap in that state. Thestatement that payday loans have charges and fees that can equal a 312percent annualized interest rate is from page 41 of the November 9, 2008issue of New York Times Magazine, in an article titled “Check Cashers,Redeemed,” which began on page 36. The statement by a payday lendercomparing the high annual percentage rates on these loans to the cost of aton of salmon or the cost of renting a hotel room for a year is from page 59of the May 24–30, 2010 issue of Bloomberg Businessweek, in an article titled“Payday Nation.” This article also mentions the growing number of statesthat are imposing interest rate caps on such loans. The higher credit scoresof Asian Americans compared to other minority groups, and even whites,were reported on page 80 of a report by the Board of Governors of theFederal Reserve System titled Report to the Congress on Credit Scoring and ItsEffects on the Availability and Affordability of Credit, published in August2007. The downgrading of California’s state bonds in 2001 was covered inmany places, including page A3 of the April 25, 2001 issue of the Wall StreetJournal. The buying up of future payments due to accident victims ininstallments by paying a lump sum was discussed in an article beginning onthe front page of the Wall Street Journal of February 25, 1998 titled“Thriving Industry Buys Insurance Settlements from Injured Plaintiffs.”Statistics on the purchase of annuities are from page 65 of U.S. News &World Report, October 22, 2001, in an article titled “Betting on a LongLife.” Statistics on the known reserves of petroleum in various years are fromSection II, Table 1 of Basic Petroleum Data Book, Vol. XX, No. 2 ( July 2000),published by the American Petroleum Institute. Twentieth century energyconsumption and the growth of known reserves of various metals werediscussed on pages 40 and 41 of an article titled “Natural Resources” in TheFortune Encyclopedia of Economics, edited by David Henderson. Informationon the proportion of exploratory oil wells which turn out to produce oil andon the percentage of oil extracted from pools of oil are from pages 19 and20 of a supplement titled “A Survey of Oil” in the April 30, 2005 issue ofThe Economist. Data on the reserves of copper are from pages 12 and 13 ofA Poverty of Reason by Wilfred Beckerman, published by the Independent

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Institute. The 35 percent increase in the known reserves of natural gas in theUnited States from 2006 to 2008 was reported on page B1 of the June 18,2009 issue of the New York Times, in an article titled “Estimate PlacesNatural Gas Reserves 35% Higher.” Innovations leading to increasedproduction in old oil fields were reported in a front-page story from theMarch 5, 2007 issue of the New York Times, under the headline “OilInnovations Pump New Life into Old Wells.” The bet between JulianSimon and Paul Ehrlich was covered in the December 2, 1990 issue of NewYork Times Magazine in an article beginning on page 52 titled “Betting onthe Planet.” The estimate in the 1970s that the United States had enoughnatural gas reserves to last for more than one thousand years was reportedon page 26 of the April 27, 1977 issue of the Wall Street Journal, in aneditorial titled “1,001 Years of Natural Gas.” Estimates of oil reserves in theAthabasca region of Canada are from page A5 of the October 8, 2005 issueof the Wall Street Journal in an article titled “Is the World Running Out ofOil?” The fact that the cost of finding oil had fallen by two-thirds between1977 and 1998 is based on U. S. Department of Energy statistics quoted onpage 42 of Julian Simon and the Triumph of Energy Sustainability by RobertL. Bradley, Jr., published in 2000 by the American Legislative ExchangeCouncil. The financial turnaround of the Murrin Murrin nickel miningproject in Australia was described on page C6 of the March 26, 2007 issueof the Wall Street Journal , in an article titled “Comeback in the Outback.”

CHAPTER 13: RISKS AND INSURANCE

The epigraph is from page A14 of the March 26, 2008 issue of the WallStreet Journal, under the title “Uncle Sam Stocks Up.” Comparisons of theinterest rates in Mexico, Brazil, and the United States are based on data ina graph on page 68 of the June 29, 2002 issue of The Economist in an articletitled “Spreading Risk.” Short-term interest rates in Hong Kong, Russia,and Turkey were reported on page 98 of the May 3, 2003 issue of TheEconomist. Rates of return on venture capital are from page C1 of the WallStreet Journal of April 29, 2002 in a story titled “Venture Firms Face

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Backlash from Investors.” Investment in infrastructure by pension funds wasdiscussed on pages C1 and C2 of the June 13, 2007 issue of the Wall StreetJournal, in an article titled “Investing in the Fast Lane.” Information on thehistoric consecutive daily gains of the Dow Jones Industrial Average is frompage C1 of the April 12, 2007 issue of the Wall Street Journal , under theheadline “Dow Ends Run at History.” Information on the current value of adollar invested in gold, stocks, and bonds in 1801 is from an article titled“Now What?” in the September 21, 1998 Forbes Global Business & Finance,pages 20 and 21. Data on real rates of return on stocks and bonds from the1930s to the end of the twentieth century are from The Economist, May 5,2001, page 7 of a special section titled “Global Equity Markets: The Riseand the Fall.” Information on the potential returns on the investment of$100,000 through various investment strategies from 2000 to 2010 is frompages B1 and B4 of the January 2, 2010 issue of the New York Times, in anarticle titled “Steady Savers Still Came Out Ahead.” The fact that the 400richest Americans lost $283 billion in one year was reported on pages 80 and81 of the September 30, 2002 issue of Forbes magazine, under the title “TheMarch of the 400.” The fact that more than 50 mutual funds have assetsexceeding $10 billion was reported on page R1 of the May 1, 2006 issue ofthe Wall Street Journal in an article titled “When Mutual Funds Don’t WantYour Cash.” The fact that just over half of the actively managed mutualfunds did better than the Standard & Poor’s Index in 2005 was reported onpage 76 of the January 28, 2006 issue of The Economist. The discussion ofmutual funds draws on two articles from page R1 of the April 9, 2001 issueof the Wall Street Journal: “Seven Reasons to Index— and to Avoid PlayingThose Favorites” and “Index Funds: 25 Years in Pursuit of the Average.” Thefact that a $10,000 investment in mutual funds in 1998 was worth less than$9,000 in 2003 was reported in an article titled “Five Years of Feast andFamine” in the Wall Street Journal of June 2, 2003, beginning on page R1.The fact that just one mutual fund made money in each year of the decadeended in 2003 was covered on the same page of the same issue under thetitle “Survivor: How One Fund Avoids Losses.” The information aboutYale’s offer of student loans to be repaid according to the students’ futureincome is from page 70 of The Economics of Life by Gary S. Becker and

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Guity Nashat Becker. Information on the number of insurance companiesin the United States is from page 507 of the Bureau of the Censuspublication Statistical Abstract of the United States: 2000. Data on thepercentage of current premium income that is paid out in current claims byAllstate and State Farm insurance companies is from page C10 of theJanuary 2, 2003 issue of the Wall Street Journal in an article beginning onpage C1 titled “‘Colossus’ at the Accident Scene.” The proportion of lifeinsurance companies’ income from premiums and investments is from page81 of Life Insurers Fact Book: 2000, published by the American Council ofLife Insurers. The quotation from The Economist about premiums notcovering the claims on insurance companies is from page 15 of theSeptember 18, 2004 issue, under the title “The Storms Ahead.” The factthat automobile and property insurers in 2004 made their first overall profitfrom underwriting alone since 1978 was reported on page 46 of the August29, 2005 issue of U.S. News & World Report, in an article titled “Auto RatesShift into Lower Gear.” Data on the market share of property and casualtyinsurance companies in 2007 are from page 41 of The Insurance Fact Book:2009, published by the Insurance Information Institute. The evolution offederal deposit insurance in the 1930s and the half-trillion-dollar bailout ofthe savings & loan industry in the 1980s were both discussed in Chapter 4of FDR’s Folly by Jim Powell. The quotation from a City Attorney inOakland who complained that it was unfair to charge people differentautomobile insurance premiums based on where they lived is from page B1of the San Francisco Chronicle of May 30, 2003 under the title “CarInsurance Rates Hit.” Differences in prices for the same automobileinsurance coverage in different cities were reported on page 47 of the August29, 2005 issue of U.S. News & World Report. Data on differences inautomobile insurance premiums between Manhattan and Brooklyn are frompage D2 of the January 7, 2004 issue of the Wall Street Journal, in an articlebeginning on page D1 of that issue under the title “Car Premiums arePushed Up by Rising Fraud.” The U.S. Senate’s 95–0 vote to forbidinsurance companies from using information from genetic tests todetermine coverage or premiums was reported on page D11 of the WallStreet Journal of October 15, 2003 under the title “In 95–0 Vote, Senate

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Passes Bill Barring Genetic Discrimination.” The banning of differentinsurance charges for women and men in France, and attempts to extend theban to the European Union as a whole, were mentioned on page 70 of theNovember 15, 2003 issue of The Economist, under the title “The Price ofEquality.” The quote about the use of FEMA as insurance for an affluentbeach community is from page 12 of the June 14–20, 2004 issue of TheWashington Post National Weekly Edition in an article titled “Shoring UpBeach Towns.” John Stossel’s experience building and insuring an ocean-front house was discussed on pages 136 to 139 of his book Give Me a Break.Thousands of repeatedly damaged properties which received governmentinsurance payments over the years that exceeded the total value of thoseproperties were discussed on page A14 of the May 24, 2006 issue of the WallStreet Journal under the title “Taxpayers Get Soaked.” The statement thatthe government could pay $800,000 to every family of four in New Orleans,rather than pay the costs of rebuilding the city after Hurricane Katrina, isfrom Slate, in an online article published on September 22, 2005, titled“Hurricane Relief? Or a $200,000 Check?” The New York Times editorialcalling for a federal fund to subsidize private insurers appeared on page A24of the October 1, 2007 issue under the title “Insurance for the Next BigOne.” The use of global positioning systems by insurance companies lookingfor their policy-holders in the wake of natural disaster is from a storybeginning on the front page of Section C of the New York Times ofSeptember 18, 1999 titled “Headed for Trouble; Insurers Deploy Legions ofAdjusters to Areas Hit by Storm.” The contrast between private sectorresponses and governmental responses to Hurricane Katrina was discussedin an editorial titled “Private FEMA” on page A18 of the September 8, 2005issue of the Wall Street Journal. The fact that a privately-owned bridge inMississippi was fixed six months after it had been destroyed by HurricaneKatrina, while a government-owned bridge was still wrecked nearly sixteenmonths later, was reported on the front page of the January 27, 2007 issueof the Wall Street Journal , in an article titled “In Katrina’s Wake: Where Isthe Money?” The Indian government’s tardiness in responding to a cyclonewas discussed on page 535 of Indian economist Barun S. Mitra’s article,

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“Dealing with Natural Disaster: Role of the Market,” in the December 2000issue of Journal des Economistes et des Etudes Humaines.


The epigraph is from a column titled “Economic Profit vs. AccountingProfit” by Robert L. Bartley on page A17 of the Wall Street Journal of June2, 2003. The additional $81 million in costs resulting from constructiondelays caused by debates over the design of a new span of the Bay Bridge inSan Francisco were reported on page B1 of the December 8, 2005 issue ofthe San Francisco Chronicle, under the headline “Bay Bridge Pause Cost $81Million.” Information on bankruptcy filings before and after a new law waspassed in 2005 is from page D3 of the November 22, 2005 issue of theWashington Post, under the title “Personal Bankruptcy Filings Fall Sharply.”The comment on the negative effects of anticipations of land reform is frompage 30 of Development Without Aid by Melvyn B. Krauss. The economicconsequences of political threats to nationalize the tea plantations in SriLanka were discussed on page 832 of Volume II of Asian Drama: An Inquiryinto the Poverty of Nations by Gunnar Myrdal, first printing published in1968 by the Pantheon division of Random House. The declining Malaysiancurrency and stock market after irresponsible statements by its primeminister were mentioned on page 257 of Thunder from the East by NicholasD. Kristof and Sheryl WuDunn. Hoarding by Russian consumers andbusiness enterprises during the 1991 inflation was discussed on pages 7 and10 to 11 of Kapitalizm: Russia’s Struggle to Free Its Economy by Rose Brady.The downgrading of California’s state government bonds by Standard &Poor’s was reported on the front page of the April 25, 2001 issue of the SanFrancisco Chronicle, under the headline “S&P Lowers California’s BondRating” and Moody’s downgrading was reported on page A3 in theSacramento Bee of November 22, 2001, under the title “State’s Bond RatingLowered Again.”

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CHAPTER 15: NATIONAL OUTPUT

The epigraph is from page 191 of Our Culture, What’s Left of It byTheodore Dalrymple. The fact that the money supply in the United Statesdeclined by more than one-third from 1929 to 1933 was noted on page 352of A Monetary History of the United States: 1867–1960 by Milton Friedmanand Anna Jacobson Schwartz. The decline in real output from 1929 to 1933was shown on page 157 of the February 2004 issue of Survey of CurrentBusiness. Data on unemployment in Germany and the United States duringthe Great Depression are from page 176 of Global Capitalism by Jeffry A.Frieden and page 324 of the 2006 Economic Report of the President. The fearsof a glutted market expressed by Seymour Harris and Vance Packard werequoted from the latter’s book The Waste Makers, pages 7 and 19. PresidentFranklin D. Roosevelt’s remarks about the causes of the Great Depressionare from page 113 of FDR’s Fireside Chats, edited by Russell D. Buhite andDavid W. Levy. Data on national output during the years 1929, 1933, 1936,and 1941 are from pages 168 and 173 of the August 2007 issue of Survey ofCurrent Business, under the title “GDP and Other Major NIPA Series,1929–2007: II.” Data showing the real value of consumer durables between1945 and 1950 more than doubling are from page 9 of the May 2004 issueof Survey of Current Business. The rises and falls in the real prices of variousAmerican consumer goods between the years 1900 and 2000 were shown onpage 91 of the December 23, 2000 issue of The Economist. Details on thesurveys indicating the improved quality of vehicles in the late twentieth andearly twenty first centuries can be found on page 32 of Myths of Rich & Poorby W. Michael Cox and Richard Alm, and page 52 of the September 2003issue of Consumer Reports, under the title “Luxury Lineup.” Data on theincreased square footage of new houses between 1983 and 2000 are frompage 29 of the November 2001 issue of Housing Market Statistics, publishedby the National Association of Home Builders. Overestimates of inflationby the consumer price index, and the resulting underestimates of the averageAmerican’s real income were discussed on page 21 of Myths of Rich & Poorby W. Michael Cox and Richard Alm. The median ages of the populationsof various countries are from page 20 of the 2010 edition of Pocket World in

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Figures, published by The Economist magazine. Differences between theaverage per capita incomes in Japan and the United States, when measuredby official exchange rates rather than by the actual purchasing power of theyen and the dollar, were discussed on page 6 of the third edition of TheIllustrated Guide to the American Economy by Herbert Stein and MurrayFoss. The fact that per capita output in Japan was just three-quarters of theper capita output in the United States is from page 98 of the June 5, 2004issue of The Economist, under the heading “GDP per Person.” The GrossDomestic Products of Norway and Italy in 2007 were reported on page 28of the 2010 edition of Pocket World in Figures, published by The Economistmagazine. Keynes’ statement was quoted from page 69 of The Economist ofJanuary 21, 2006. The global opinion poll indicating a rough correlationbetween national prosperity and personal happiness was discussed on page63 of the July 14, 2007 issue of The Economist, in an article titled “WhereMoney Seems to Talk.” The list of the five countries with the highest GrossDomestic Product as measured by purchasing power in 2007 is from page26 of the 2010 edition of Pocket World in Figures, published by TheEconomist magazine. Data comparing the GDP per capita in China withthat of Japan are from pages 132 and 170 of the same publication. Data onthe changing degrees of income inequality in the United States are from anarticle by Goldin and Katz titled “Decreasing (and Then Increasing)Inequality in America: A Tale of Two Half-Centuries” in The Causes andConsequences of Increasing Inequality, edited by Finis Welch. Data on therate of return on Standard & Poor’s 500 mutual funds are from page C5 ofthe New York Times of January 1, 2004, in a story beginning on page A1titled “Year’s Big Rally Helps Investors Regain Ground.” AlexanderHamilton’s estimate that four-fifths of the American people’s clothing weremade in their own homes was cited on page 97 of The Americans: TheDemocratic Experience, 1973 edition, by Daniel J. Boorstin.

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CHAPTER 16: MONEY AND THE BANKING SYSTEM

The epigraph is from page 12 of The First Wall Street by Robert E.Wright. The fact that the assets of American banks passed the $10 trillionmark in 2004 is from page 236 of the Spring 2005 issue of the FederalReserve Bulletin, in an article titled “Report on the Condition of the U.S.Banking Industry: Fourth Quarter, 2004.” The use of warehouse receipts fortobacco as money in colonial America was mentioned on page 75 of AHistory of the American People by Paul Johnson. The use of gin as currencyin British West Africa was mentioned on page 233 of The EconomicRevolution in British West Africa by Allan McPhee, second edition. The useof cigarettes as money in a prisoner-of-war camp during World War II wasdescribed by an economist who was one of those prisoners in an article inthe November 1945 issue of Economica titled “The Economic Organisationof a P.O.W. Camp.” The use of salt and bread as money in the early days ofthe Soviet Union was mentioned on page 8 of The Turning Point by NikolaiShmelev and Vladimir Popov. The fact that large stones serve as currency onthe islands of Yap was reported on the front page of the June 30, 2006 issueof the Los Angeles Times, under the headline “Pocket Change for Giants.”The quote about Argentineans’ resort to barter during the Argentinemonetary crisis of 2002 is from page A5 of the Los Angeles Times of May 6,2002, in a story that began on page A1 under the title “Where To Swap TillYou Drop.” The resorting to barter and scrip in the United States during theGreat Depression was mentioned on page 139 of The Forgotten Man byAmity Shlaes. The fact that a hundred-dollar bill in 1998 had lesspurchasing power than a twenty-dollar bill in the 1960s is from page 47 ofan article titled “Going Underground,” in the September 21, 1998 issue ofForbes Global Business & Finance. The preference for the currency issued bythe Bank of North America over the government’s currency during the1780s was noted on page 36 of The First Wall Street by Robert E. Wright.The fact that Chinese money was once preferred to Japanese money in Japanis from page 150 of a book titled Money, edited by Jonathan Williams. Thefact that most savings accounts in Bolivia were in dollars during thatcountry’s runaway inflation is from page 210 of an article titled

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“Hyperinflation,” in The Fortune Encyclopedia of Economics, edited by DavidHenderson, where the German hyperinflation of the 1920s was alsodiscussed on page 208. The fact that South Africa’s rand had replacedZimbabwe’s dollar as the currency of choice in Zimbabwe in 2007 wasreported on the front page of the August 2, 2007 issue of the New YorkTimes, in an article titled “Caps on Prices Only Deepen Zimbabweans’Misery.” The estimate that 80 percent of the demand for gold comes fromthe jewelry industry is from page C1 of the Wall Street Journal of October8, 2002, in a story titled “Hoarders Drive Up Gold, Despite Slump inJewelry Sales.” The changing prices of gold in 1980, 1999 and 2010 are frompage A4 of the June 13, 2010 issue of the New York Times, in a news reportthat began on the front page, under the title “Financial Uncertainty RestoresGlitter to an Old Refuge, Gold.” The quotation from John Maynard Keynesabout inflation is from page 86 of the 1952 printing of his Essays inPersuasion. The haste of Russians to spend their rubles during that country’sinflation was in a news story from the front page of the Christian ScienceMonitor of August 31, 1998 in a story titled “Russians Replay ‘Bad OldDays’.” Data on the 1921 inflation in the Soviet Union is from page 6 of TheTurning Point by Nikolai Shmelev and Vladimir Popov. Russians usingrubles for wallpaper and toilet paper in 1991 was reported on page 11 ofKapitalizm: Russia’s Struggle to Free Its Economy by Rose Brady. Informationon the exchange rates between dollars and marks, and the number ofprinting presses in use during the German inflation of the 1920s are frompages 450 and 451 of Germany: 1866–1945 by Gordon A. Craig. Hitler’sphrase “starving billionaires,” used during the German inflation, wasmentioned on page 4 of Wilson’s War by Jim Powell. Internal differencesamong various goods within the consumer price index were discussed onpage A2 of the April 20, 2006 issue of the Wall Street Journal in an articletitled “Jump in Prices Stirs Rate Concerns.” Information on inflation ratesand changes in real output in Latin America from 1990 and beyond is frompage 22 of the August 18, 2007 issue of The Economist, in an article titled“Adiós to Poverty, Hola to Consumption.” Data on the declining price levelsin Britain and the United States from 1873–1896 are from page 8 of GlobalCapitalism by Jeffry A. Frieden. The collapse of thousands of American

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banks during the Great Depression was mentioned on page 351 of AMonetary History of the United States: 1867–1960 by Milton Friedman andAnna Jacobson Schwartz. The slowing circulation of money in the UnitedStates, along with the declining amount of money, in the years following thestock market crash of 1929 was spelled out on pages 302 to 305 of the samebook. President Woodrow Wilson’s statement about the powers andstructure of the Federal Reserve System was quoted on page 3 of A Historyof the Federal Reserve by Allan H. Meltzer. The remarkable agreement ofboth liberal and conservative economists in the United States on theconfused and counterproductive monetary policies of the Federal Reserveduring the Great Depression of the 1930s can be found by comparing theaccounts in The Great Crash by John Kenneth Galbraith (especially hiscomment on page 27 of the 1997 edition), and in A Monetary History of theUnited States: 1867–1960 by Milton Friedman and Anna J. Schwartz, wherethis point was discussed on pages 407 to 419, while the upward shift in theFederal Reserve’s discount rate in 1931 was shown on page 304 of this book.The quotation from Schumpeter about the role of wages in the GreatDepression is from page 181 of the March 1931 issue of the AmericanEconomic Review. Walter Lippmann’s comments about how maintainingpre-depression prices and wages during a depression leads to unsold goodsand unemployed workers were quoted from page 92 of FDR’s Folly by JimPowell. President Herbert Hoover’s use of the federal government to try toprevent agricultural prices from falling was mentioned on pages 50 and 52of the third volume of his Memoirs. John Maynard Keynes’ comments onthe monetary policy of the British government in 1931 are from page 283of his Essays in Persuasion, 1952 printing. The decline of wheat prices in the1890s was discussed on page 13 of Global Capitalism by Jeffry A. Frieden.The quote by William Jennings Bryan is from page 14 of the same book.The fact that more countries went on the gold standard at the end of thenineteenth century and early twentieth century was noted on pages 16 and17 of the same book. The number of financial institutions and merchantsconnected by Visa credit cards was mentioned on page C1 of the July 16,2005 issue of the San Francisco Chronicle in a news story titled “Grocers,Drugstores Sue Visa USA.” BusinessWeek magazine’s comment on Federal

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Reserve chairman Alan Greenspan was on page 45 of the June 16, 2003issue. The San Francisco Chronicle story about Wall Street reactions to theFederal Reserve’s omission of a phrase is from page B1 of the January 29,2004 issue, under the title “Fed’s New Wording Worries Wall Street.” Theremarks about how investors dissect the comments from officials of theFederal Reserve are from page B1 of the March 24, 2007 issue of the WallStreet Journal, under the title “As Investors Puzzle Over Fed Statement,Dow Gains.” The problems of Albanian and Czech banks in the post-Communist era were reported on pages 77 and 78 of the April 28, 2001issue of The Economist. The share of foreign-owned bank assets in easternEuropean countries in 2006 was shown on page 23 of a special section titled“Paradise Lost,” in the May 17, 2008 issue of The Economist. The fact thatindividuals’ holdings of gold are largest in India was reported on pages 69and 70 of an article titled “Foreseeing the Future” in the March 15, 2003issue of The Economist. The fact that 70 percent of the savings in India’sstate-dominated banking system are lent to the government or government-owned enterprises was reported on page C6 of the March 23, 2007 issue ofthe New York Times, in an article titled “India’s Banks Are Seen asAntiquated and Unproductive.” The fact that Chinese banks invest thepeople’s savings at subsidized rates to government-owned enterprises thathave low rates of return or even operate at a loss is from page 170 ofReviving the Invisible Hand by Deepak Lal. The high concentration of bankfailures in small communities in states that restricted branch banking duringthe 1920s and during the Great Depression of the 1930s was discussed onpage 308 of Economics and Public Welfare by Benjamin M. Anderson.

CHAPTER 17: GOVERNMENT FUNCTIONS

The epigraph by Richard A. Epstein is from page 15 of his bookOverdose. The epigraph by President Lyndon B. Johnson was quoted frompage 181 of The Johnson Years: The Difference He Made by Robert L.Hardesty, published in 1993 by the Lyndon Baines Johnson Library. Thecomment on the changing role of government in economies around the

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world is from page 10 of a book that goes into that subject at length— TheCommanding Heights, written by Daniel Yergin and Joseph Stanislaw. Theaccount of the airport at Kinshasa, Congo, is from page A1 of the April 30,2002 issue of the Wall Street Journal, in a story titled “Kinshasa is Poor, Scaryand a Boon for Air France.” Police corruption in Bolivia was reported onpage 37 of the May 4, 2002 issue of The Economist under the title “Policingthe Police.” The story of the wealthy and politically-connected Egyptianbusinessman who was sentenced to death for hiring a hit man is from pageA4 of the May 22, 2009 issue of the New York Times, in an article titled“Tycoon Gets Death in Singer’s Murder, Stunning an Egypt Leery of ItsCourts.” The fact that both businesses and international aid agencies aretaking the level of bribery and corruption into consideration when decidingwhere to invest and lend was mentioned on page 65 of the March 2, 2002issue of The Economist. The ranking of corrupt countries is from theTransparency International Corruption Perceptions Index 2004, available on-line at www.transparency.org. The reluctance of foreign companies to useRussian accountants during the czarist era was mentioned on page 187 ofPioneers for Profit by John P. McKay. The comment about the looting ofRussian oil companies is from page 57 of Saving Capitalism from theCapitalists by Raghuram G. Rajan and Luigi Zingales. Bribery in Russianuniversities was reported in the April 18, 2002 issue of The Chronicle ofHigher Education, in a story titled “Reports of Bribe-Taking at RussianUniversities Have Increased, Authorities Say.” The quote and statistic aboutpolitically linked enterprises in Russia are from page 63 of the November 1,2003 issue of The Economist. John Stuart Mill’s description of corruption in19th century Russia is from page 882 of Volume III of The Collected Worksof John Stuart Mill. The comments by Aditya Birla on the problems createdby India’s bureaucracy are from page 183 of India Unbound by GurcharanDas. Information on the number of days required to start a business inCongo and Singapore is from page 112 of the October 6, 2007 issue of TheEconomist, under the heading “Doing Business.” The comments by Sovieteconomists on the cutting down of forests without reseeding them are frompage 109 of The Turning Point by Nikolai Shmelev and Valdimir Popov. Theingenious devices used by many affluent northern California communities

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to prevent development were explored in articles in Land Use and Housingon the San Francisco Peninsula, edited by Thomas M. Hagler and publishedby the Stanford Environmental Law Society. The comments by Sovieteconomists about confiscation of the profits of Soviet enterprises are frompage 261 of The Turning Point by Shmelev and Popov and these enterprises’inability to spend these profits was mentioned on page 147. KennethArrow’s quote about morality and business is from page 3 of the Summer2006 issue of Religion & Liberty, in an article titled “The Economy of Trust:An Interview with Kenneth Arrow.” The comment on bribes in China andJapan is from page 42 of The Character of Nations by Angelo Codevilla. Thehigh percentage of wallets with money in them that were turned in bypeople in Denmark was mentioned on page 80 of The White Man’s Burdenby William Easterly. Unpaid parking tickets by U.N. diplomats from variouscountries were discussed on page 11 of Section 4 of the August 13, 2006issue of the New York Times in David Brooks’ column. The ability of theMarwaris of India to rely on each other’s word in business was mentionedon page 143 of India Unbound by Gurcharan Das and of Hasidic Jews to dothe same in the New York diamond industry was covered in Chapter 5 ofDiamond Stories by Renée Rose Shield. The extraordinary efforts to preventfraud in India are from page 9 of a special supplement on India in the June2, 2001 issue of The Economist. The term “the radius of trust” appeared onpages 79 and 80 of The White Man’s Burden by William Easterly andrestriction of Malagasy grain trading firms to the level of family enterpriseswas discussed on page 81 of the same book. The story of how unscrupulouslandlords exploit and destroy rent-controlled apartment buildings was toldon page 43 of Zoning, Rent Control and Affordable Housing by WilliamTucker and in The Ecology of Housing Destruction by Peter D. Salins. Thehigh cost of officially setting up a business in Cameroon was discussed onpage 188 of The Undercover Economist by Tim Harford. The comment by aRussian mother about her children’s view of honesty is from page 3 ofKapitalizm by Rose Brady. The quotation about consumer frauds byinvestigative journalist John Stossel is from page 250 of his book Give Me aBreak. Examples of private market ways of taking externalities into accountare found in an article titled “Public Goods and Externalities” in The

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Fortune Encyclopedia of Economics, edited by David R. Henderson. The storyof the genesis and consequences of President Nixon’s wage and pricecontrols was told from pages 60 to 64 of The Commanding Heights by DanielYergin and Joseph Stanislaw and from an essay by Herbert Stein in the WallStreet Journal of August 15, 1996, page A10. The comment that educationalresults “take a long time to come” is from page 313 of India Unbound byGurcharan Das. The mention of a former EPA administrator’s conclusionsabout removing toxic material is from page 11 of Breaking the Vicious Circle:Toward Effective Risk Regulation by Stephen Breyer. The debate betweenthe Council of Economic Advisers and Congress over the costs and benefitsof making the nation’s streams 99 percent pure was noted on pages 194 to195 of Presidential Economics, second revised edition, by Herbert Stein. Thebeneficial effects of extremely minute traces of arsenic in water werediscussed on page 34 of the January 19, 2004 issue of Insight on the Newsunder the title “Can Toxins Lead to Healthier Lives?” The effects of smalland large doses of saccharin on cancer in laboratory rats are from an articlebeginning on page 54 of the June 9, 2003 issue of Fortune magazine, titled“A Little Poison Can Be Good for You.” The costly cleanup of a toxic wastesite in New Hampshire was discussed on pages 11 and 12 of Breaking theVicious Circle by Stephen Breyer. The bad effects of the gasoline additiveMTBE on ground water have been discussed in many places, including theSan Francisco Chronicle of August 19, 2001 in a front page story titled“Congress Not Told of MTBE Dangers.” The costs of U.S. governmentregulations on business are from a study titled “The Impact of RegulatoryCosts on Small Firms” published by the Small Business Administration.The practice in Islamic finance of recycling documentation for differentkinds of financial transactions was reported on page 82 of the September 6,2008 issue of The Economist, under the title “Savings and Souls.” FranklinD. Roosevelt’s use of presidential powers created during the First WorldWar to take the United States off the gold standard was mentioned on page86 of The New York Times Century of Business, edited by Floyd Norris andChristine Bockelmann. The effects of competition from both private-sectorcouriers and private phone service providers on the government-run postalservice and state-owned phone industry in India were described on pages

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A1 and A12 of the October 3, 2006 issue of the Wall Street Journal, in anarticle titled “As Economy Zooms, India’s Postmen Struggle to Adapt.”

CHAPTER 18: GOVERNMENT FINANCE

The epigraph by Arthur F. Burns is from page 13 of his lecture “TheAnguish of Central Banking,” from the 1979 Per Jacobsson Lecture,sponsored by the Per Jacobsson Foundation. Data on the spending of theUnited States government in 2009 are from page 423 of the EconomicReport of the President, 2010 edition. Smokers’ responses to higher taxes oncigarettes in Alaska were discussed on page 37 of The Greedy Hand: HowTaxes Drive Americans Crazy and What to Do About It by Amity Shlaes. Thefact that many financial-services professionals left the U.K. for Switzerlandafter top personal tax rates were raised to 51 percent was reported on pageC2 of the August 25, 2009 issue of the Wall Street Journal, in an article titled“New U.K. Tax Sends Hedge Funds Fleeing.” The decline in tax revenues inMaryland after the state imposed higher tax rates on millionaire householdswas reported on page A18 of the March 12, 2010 issue of the Wall StreetJournal, under the headline “Maryland’s Mobile Millionaires.” Data onincreased revenue after a reduction in the capital gains tax are from pageA18 of the Wall Street Journal of May 14, 2001 in an article titled “RealRelief: A Capital-Gains Tax Cut.” The quotation about rising tax revenuesafter a tax rate cut in India is from page 200 of India Unbound by GurcharanDas. The tripling of tax revenues in Iceland after the corporate tax rate wasreduced was reported on page A14 of the March 12, 2007 issue of the WallStreet Journal, under the title “Iceland’s Laffer Curve.” The higher tax ratespaid by American corporations compared to corporations in foreign nationswere shown on page 61 of the August 4, 2007 issue of The Economist, in anarticle titled “Overhauling the Old Jalopy.” Discussion of rising tax revenuesafter the capital gains tax rate was cut in the United States in 1978, 1997,and 2003 is from page A14 of the March 2, 2006 issue of the Wall StreetJournal under the title “Non-Dynamic Duo.” Differences between theCongressional Budget Office’s estimates for federal tax receipts and the

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actual tax receipts for the years 2003 and 2007 were shown on page A16 ofthe October 9, 2007 issue of the Wall Street Journal, under the headline“The Shrinking Deficit.” The New York Times’ surprise over a rise in taxrevenues after a cut in tax rates was expressed in a front-page story titled“Surprising Jump in Tax Revenues Curbs U.S. Deficit” in their July 9, 2006issue. Information on the highest marginal tax rate for the years 1980 and2004, as well as the share of taxes paid by the top 5 percent of incomeearners for those years, is from page A14 of the August 24, 2007 issue of theWall Street Journal, under the title “How to Raise Revenue.” Oliver WendellHolmes’ remarks about catch words are from pages 230 and 231 of hisCollected Legal Papers. John Maynard Keynes’ comments about taxation arefrom page 5 of his 1933 work The Means to Prosperity. Edmund Burke’sremarks in Parliament about taxation of the American colonies are frompage 434 of Volume I of The Works of the Right Honourable Edmund Burke.The high unemployment, low productivity, and general decline in theAmerican economy from the late 1960s to the early 1980s in the wake ofeffective capital gains tax rates in excess of 100 percent were discussed onpage A15 of the April 10, 2008 issue of the Wall Street Journal, under theheadline “The Inflation Threat to Capital Formation.” The decline in theeffective capital gains tax rate to below 40 percent by 1987 was shown onthe same page. Data on the gross domestic product and U.S. national debtheld by the public in 1945, 1994, and 2004 are from pages 423 and 424 ofthe Economic Report of the President, 2010 edition, published by the U.S.Government Printing Office that year. The fact that in 2007 Japan’s nationaldebt was more than 150 percent of the nation’s GDP was shown on page 80of the November 1, 2008 issue of The Economist, in an article titled “Puttingthe Air Back In.” Data on the national income and national debt of theUnited States in 1945 are from pages 224 and 1117 of the Census Bureaupublication Historical Statistics of the United States: Colonial Times to 1970.The statistic that 44 percent of the U.S. government’s debt was held byforeigners in 2007 is from page 240 of Analytical Perspectives: Budget of theUnited States Government, Fiscal Year 2009 published by the U.S.government in 2008. Michael Boskin’s comment that Wall Street “yawned”at the 2004 budget deficit is from the front page of a November 2004 Policy

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Brief titled “Sense and Nonsense About Federal Deficits and Debt” byProfessor Boskin, published by the Stanford Institute for Economic PolicyResearch. The New York Times story about a declining deficit was on thefront page of the July 13, 2005 issue under the title “Sharp Increase in TaxRevenue Will Cut Deficit.” Information on the national debt of Britain, theUnited States, and Japan as a share of GDP is from page 73 of the June 13,2009 issue of The Economist, under the headline “The Big Sweat.” Thedeclining capital reserves of the FHA were reported on page A6 of theNovember 13, 2009 issue of the Wall Street Journal, under the headline“Housing Agency Reserves Fall Far Below Minimum.” The decline in theFDIC’s deposit-insurance fund was reported on page A2 of the September30, 2009 issue of the Wall Street Journal, in an article titled “Bank-BailoutFund Faces Years in Red as Failures Jolt System.” The fact that the FDICin 2009 required banks to prepay their deposit premiums through 2012 wasreported on page 8 of the Business Section of the November 13, 2009 issueof the Boston Globe, in an article titled “Banks to Prepay $45B for InsuranceFees.” Data on the size of the national debt of the United States in 2009 arefrom pages 423 and 424 of the Economic Report of the President, 2010edition. Information on the share of spending allocated to the military,Medicare and Medicaid, and Social Security in the 2008 budget is frompage 28 of the February 10, 2007 issue of The Economist, in an article titled“Fiscal Frustrations.” Data on the costs of crime and of prisons in Britain arefrom page 109 of A Land Fit for Criminals by David Fraser. The costs ofcrime to victims in the United States compared with the costs ofimprisonment of criminals are from page 211 of the April 29, 1996 issue ofFortune, under the title “Investing in Prison.” Adam Smith’s comment ongovernment spending patterns in 18th century France is from page 687 ofhis classic The Wealth of Nations, Modern Library edition. Information onretirement age and pensions in Italy is from page 52 of the July 28, 2007issue of The Economist, in an article titled “La Dolce Pensione.” The politicalbacklash against pension reforms in France and Germany was described inan article beginning on page C1 of the August 6, 2008 issue of the New YorkTimes, under the headline “After Enacting Pension Cuts, Europe Weathersa Storm.” Information about the disability claims of retirees of the Long

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Island Rail Road can be found in a front-page story which was continuedon pages 26 and 27 of the September 21, 2008 issue of the New York Times,under the headline “Retirees’ Disability Epidemic.” The quotation aboutBrazil’s government workers’ pension plan is from page 36 of the April 5,2003 issue of The Economist in an article titled “Lula’s Great PensionBattle.” The New Zealand poll on the likelihood of receiving governmentpensions was cited on page 71 of the April-May 2003 issue of Policy Reviewin an article titled “Market Reform: Lessons from New Zealand.” Thediscrepancies among the percentages of people aged 55 to 64 who are stillworking in the United States and Japan versus the European Unioncountries was reported on page 137 of The World in 2004, a publication ofThe Economist magazine. A comparison of the benefits of retirees in theUnited States, Japan, the Netherlands, Spain, and Greece appeared on page86 of the April 25, 2007 issue of The Economist, under the heading“Pensions.”


The epigraph is from page of 183 of Armey’s Axioms by Dick Armey. Thequote about favors to special interests by India’s government is from page318 of India Unbound by Gurcharan Das. The cost of the 2002 farm bill tothe average American family is from the National Review online fromAugust 29, 2002, in an article titled “Twisting ‘The Facts’.” The argumentthat government policy worsened, rather than alleviated, the GreatDepression can be found in A Monetary History of the United States:1867–1960 by Milton Friedman and Anna Jacobson Schwartz, pages 407 to419, in Paul Johnson’s A History of the American People, pages 737 to 760 andin Out of Work by Richard K. Vedder and Lowell E. Gallaway, pages 89 to97, 137 to 146. The remarks from Arthur F. Burns about the FederalReserve’s efforts to control inflation under his chairmanship are from page16 of his lecture “The Anguish of Central Banking,” from the 1979 PerJacobsson Lecture, sponsored by the Per Jacobsson Foundation. Informationabout how the Federal Reserve underestimated inflation during the 1960s

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and 1970s and in later years overestimated inflation is from pages 46 and 47of The Role of Policymakers in Business Cycle Fluctuations by Jim Granato andM.C. Sunny Wong. The quote from a former governor of the FederalReserve recalling the Fed’s monetary policy for battling inflation in the early1980s is from pages 128 to 129 of The Great Inflation and Its Aftermath byRobert J. Samuelson. Robert J. Samuelson’s comments about theintellectuals whose ideas led to the Great Inflation are from page 207 of thesame book. The question of how India could have gone so wrong when ithad such outstanding economists was raised on page 162 of India Unboundby Gurcharan Das. The problems of India’s nationalized banks werediscussed on page 164 of the same book. The fact that India’s middle classbegan to abandon the country’s state banks in favor of high-tech privatebanks in the early 21st century was reported on page A12 of the October 3,2006 issue of the Wall Street Journal, in an article titled “As EconomyZooms, India’s Postmen Struggle to Adapt,” which began on page A1. Theincreasing pressure applied by regulators to banks to demonstratecompliance with the Community Reinvestment Act was reported on pageA1 of the February 13, 1996 issue of the Wall Street Journal, under theheadline “Mortgage Lending to Minorities Shows a Sharp 1994 Increase.”Citigroup’s near $41 billion losses on subprime loans from 2007 to 2008were shown on page C3 of an article beginning on page C1 of the April 22,2008 issue of the New York Times titled “Banks Hunting for More Cash.”The comment that India’s government looks out for itself is from page 349of India Unbound by Gurcharan Das. Information about unemployment inthe United States following the 1929 stock market crash is from page 77 ofOut of Work by Richard K. Vedder and Lowell E. Gallaway. The quote abouthow new and rare free market democracies are is from page 317 of IndiaUnbound by Gurcharan Das. The economic results of the English Channeltunnel are from page 59 of the February 14, 2004 issue of The Economistunder the title “Under Water.” Adam Smith’s remarks on the misapplicationof money set aside by government for a particular purpose are from page 873of his The Wealth of Nations, Modern Library edition.

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CHAPTER 20: INTERNATIONAL TRADE

The epigraph is from pages 121 and 122 of Volume I of John Adams: ABiography in His Own Words, edited by James Bishop Peabody. Thecomment from the New York Times about whether the United States was a“job winner” or a “job loser” from freer trade is from an article titled “Naftaand Jobs,” which appeared in the November 14, 1993 issue, page 4 ofSection 4. The declining unemployment rate in the United States from 1993to 2000 was shown on page 26 of a special supplement in the June 29, 2002issue of The Economist under the title “Present at the Creation.” Thedeclining unemployment rate in Canada was discussed on page 14 of theJanuary 3, 2004 issue of the same magazine in an article titled “Free Tradeon Trial,” which began on page 13. The increase of jobs in Mexico wasreported on page A13 of the Wall Street Journal of March 5, 2003 and thesimultaneous increase of jobs in the United States was shown on page 371of The Economic Report of the President, 2002 edition. The increase ininternational trade in both Mexico and the United States in the yearsfollowing NAFTA was shown on page 14 of the January 3, 2004 issue ofThe Economist, in an article titled “Free Trade on Trial.” Justice Holmes’statement, “we need to think things instead of words” is from page 293 ofCollected Legal Papers by Oliver Wendell Holmes. The American exportsurpluses during the 1930s and its lower total international trade in thatdecade compared to the 1920s can be calculated from data on page 864 ofthe U.S. Bureau of the Census publication, Historical Statistics of the UnitedStates: Colonial Times to 1970. The record-breaking reduction in theinternational trade deficit of the United States in the spring of 2001 wasreported on page 35 of BusinessWeek’s May 7, 2001 issue under the title “AShrinking Trade Gap Looks Good Stateside.” India’s advantages insupplying computer services to American businesses were discussed onpages 57 to 74 of the March 2003 issue of Banca Nazionale del LavoroQuarterly Review (published in Italy) under the title “Software Exporting:A Developing Country Advantage.” The fact that India has nearly 30percent of the world’s software engineers is from page 138 of The City byJoel Kotkin. The growing practice by Taiwanese companies in building

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electronics manufacturing plants in the Czech Republic was reported onpage 43 of the January 8, 2007 issue of BusinessWeek, in an article title“Made in China— Er, Veliko Turnovo.” The quoted statement about theimportance of comparative advantage to poor nations is from page 218 of anarticle by Daniel T. Griswold titled “International Markets, InternationalPoverty: Globalization and the Poor” in the book Wealth, Poverty andHuman Destiny, edited by Doug Bandow and David L. Schindler. The WestAfrican example of comparative advantage among cocoa farmers is frompage 68 of The Economic Revolution in British West Africa by Allan McPhee,published originally in 1926 and reprinted in 1971 by Frank Cass & Co.,Ltd. The estimate of economies of scale in automobile production is frompage 76 of The Structure of American Industry, ninth edition, by WalterAdams and James Brock. Data on sales of automobiles and pick-up trucksin the United States in 2003 are from page 16 of the Spring 2004 issue ofthe J.D. Power Car Guide. Information on automobile production and salesin Australia is from pages 59 and 81 of Ward’s Automotive Yearbook, 59thedition, published in 1997. Data on Australian and American populationsand purchasing power in Australia are from pages 14, 22, 24, 62, and 102 ofPocket World in Figures, 2001 edition, published by The Economist. Data onsales of The Economist in Britain and the United States are from page 9 ofthe October 30, 2004 issue of that magazine. The fact that Toyota, Honda,and Nissan all earn most of their profits in North America is from page W1of the October 31, 2002 issue of the New York Times, in a news story titled“Slowdown? Don’t Tell Toyota Motor.” The fact that Japanese carmakersbegan to produce more cars outside of Japan than inside Japan was reportedon page C1 of the New York Times of August 1, 2006, in an article titled“Japan Makes More Cars Elsewhere.” Information on China’s toy exports toIndia, and on the Tata group’s response to other Chinese exports are frompages 48 and 49 of the May 3, 2001 issue of Far Eastern Economic Review,in an article titled “No More Fun and Games.” Holland’s position as aleading international trade nation from the 1590s to the 1740s was discussedon page 2 of The Dutch Republic by Jonathan Israel and the high wages ofDutch workers were discussed on pages 88 to 93 of An Economic and SocialHistory of the Netherlands 1800–1920 by Michael Wintle. Data on labor

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productivity in India and the United States are from page 65 of theSeptember 8, 2001 issue of The Economist, under the title “Unproductive.”The declining rates of return on capital invested in czarist Russia as theamount invested increased during its early industrialization are from page139 of Pioneers for Profit by John P. McKay. The fact that world exports in1933 were one-third of what they were in 1929 is from page 83 of Againstthe Dead Hand by Brink Lindsey. The appeal by more than a thousandAmerican economists against passage of the Smoot-Hawley tariff of 1930was reported and quoted extensively, beginning on the front page of the May5, 1930 issue of the New York Times under the headline, “1,028 EconomistsAsk Hoover to Veto Pending Tariff Bill.” The economic repercussions of thetariff were reported on pages 43 to 45 of FDR’s Folly by Jim Powell.Information about unemployment rates in the United States after thesigning of the Smoot-Hawley tariffs is from page 77 of Out of Work byRichard Vedder and Lowell Gallaway. Job losses during the 1980s in theAmerican steel industry were discussed on pages 97 and 104 of TheStructure of American Industry, ninth edition, by Walter Adams and JamesBrock and statistical estimates of the financial costs and job losses in theU.S. economy as a whole from trying to protect jobs in the steel industrywere discussed on page 57 of the November 15, 2003 issue of The Economist,in an article titled “Sparks Fly over Steel.” American job losses due torestrictions on imported sugar were discussed on page A14 of the March 6,2006 issue of the Wall Street Journal, under the title “Sweet Opportunity.”Foreign producers of American military equipment were discussed on pageC1 of the September 27, 2005 issue of the New York Times, in an articletitled “U.S. Weapons, Foreign Flavor.” Examples of the application of anti-dumping laws in the European Union are from pages 29 to 32 of The Raceto the Top: The Real Story of Globalization written by Tomas Larsson. Theapplication of American anti-dumping laws was discussed on pages 173 and174 of Globalization and Its Discontents by Joseph E. Stiglitz. The reportthat Taiwan produces most of the computer components in the world isfrom page 15 of a special section of the October 22, 2005 issue of TheEconomist titled “A Market for Ideas.” That Asian firms rely on American,Japanese and European firms for new technology was reported on page 31

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of the May 2006 issue of the Far Eastern Economic Review in an articletitled “The Offshoring of Innovation.” The Indian tutoring serviceTutorVista was discussed on page C4 of an article beginning on page C1 ofthe October 31, 2007 issue of the New York Times, under the title “Hello,India? I Need Help with My Math.” The fact that 63 percent of Japanese-brand automobiles sold in the United States in 2006 were manufactured inthe United States was shown on page 8 of the report Cars and Trucks for aVibrant America and a Better World, a publication of the Japan AutomobileManufacturers Association. Data on jobs gained and lost in the UnitedStates through outsourcing are from pages 53 and 54 of the March 2004issue of Survey of Current Business in an article titled “A Note on Patterns ofProduction and Employment by U.S. Multinational Companies.”

CHAPTER 21: INTERNATIONAL TRANSFERS OF WEALTH

The epigraph is from page 2 of The Ideas that Conquered the World byMichael Mandelbaum. Information on foreign direct investment into theUnited States and by the United States into other nations appeared on page122 of the December 6, 2008 issue of The Economist, under the heading“Foreign Direct Investment.” The statistic that 44 percent of the U.S.government’s debt was held by foreigners is from page 240 of AnalyticalPerspectives: Budget of the United States Government, Fiscal Year 2009published by the U.S. government in 2008. Data on remittances from theUnited States to Mexico are from page A14 of the New York Times ofOctober 28, 2003, under the title “A Surge in Money Sent Home byMexicans.” Data on remittances sent by Chinese and Indian workers in2005 are from page 116 of the November 26, 2005 issue of The Economistunder the title “Remittances.” The World Bank’s estimate that in 2008migrant workers sent $328 billion back home to their families is from page64 of the August 1, 2009 issue of The Economist, in an article titled “WhatGoes Up.” Information about the economic impact of remittances sent topoor countries such as Guatemala, Uganda, Bangladesh, Albania, Haiti,Moldova, and Tonga is from pages A1 and A12 of the November 1, 2006

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issue of the Wall Street Journal, in an article titled “Migrants’ Money IsImperfect Cure for Poor Nations,” and also page 60 of the January 20, 2007issue of The Economist, under the title “Europe’s Huddled Masses.” Data onmoney sent by Irish immigrants in America to members of their families inIreland in the 1840s is from page 251 of The Americans, Volume III, byDaniel Boorstin. Data on international investments are from page 6 of aspecial section of The Economist of May 3, 2003, that section being titled “ACruel Sea of Capital.” The creation of American software companies inBangalore, India, was discussed on page C3 of the March 20, 2006 issue ofthe New York Times in a news story titled “Is the Next Silicon Valley TakingRoot in Bangalore?” The production of the ten millionth Toyota in theUnited States was reported on page W1 of the October 31, 2002 issue of theNew York Times, in a story titled “Slowdown? Don’t Tell Toyota Motor.”Data on payments earned by the United States from royalty and license feesfrom other countries are from page 77 of the December 2001 issue of Surveyof Current Business. Data on payments earned for all services supplied toother countries are from page 49 of the November 2001 issue of the samepublication. The comment on the trade deficit is from page A12 of theFebruary 1, 2005 issue of the Wall Street Journal. The comparison of thetrade deficit of the United States with that of other countries is from page19 of the April 8, 2006 issue of The Economist in an article titled “StillWaiting for the Big One.” The fact that a balance of payments surpluspreceded the 1992 recession is from page D–20 of the December 1999 issueof the Survey of Current Business. Germany’s export surpluses, slowergrowth rates, and higher unemployment rates than the United States werementioned on page A12 of the January 10, 2005 issue of the Wall StreetJournal under the title “The German Disease.” The fact that the UnitedStates received more than twice as much foreign investment as any othercountry was reported on page 104 of The World in 2004, a publication by theBritish magazine The Economist. Data on foreign acquisitions of assets inthe United States are from page 59 of the April 2004 issue of Survey ofCurrent Business. The share of foreign direct investment in the UnitedStates from Europe and Canada was shown on page 45 of the June 2007issue of Survey of Current Business, in an article titled “Foreign Direct

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Investment in the United States.” The $1.3 trillion total international debtof the United States at the end of 2001 was reported on page 14 of the July2002 issue of Survey of Current Business. The fact that France, Britain, andJapan have large net foreign investments was reported on page 89 of the July1, 2006 issue of The Economist, under the title “Foreign Direct Investment”and the foreign investments of Switzerland were reported on page 99 of theDecember 7, 2002 issue. Data on foreign ownership of American railroadsin the nineteenth century are from page 195 of The History of ForeignInvestment in the United States to 1914, written by Mira Wilkins.Information on the over-all amount of foreign investment in nineteenth-century America, and on the railroads’ majority share of foreign investmentin American stocks and bonds are from pages 463 and 466 of “U. S. ForeignFinancial Relations in the Twentieth Century” by Barry Eichengreen in TheCambridge Economic History of the United States, Volume III: The TwentiethCentury, edited by Stanley L. Engerman and Robert E. Gallman. The factthat foreign investors in the early twentieth century owned one-fifth of theAustralian economy and one-half of the Argentine economy was reportedon page 20 of Global Capitalism by Jeffry A. Frieden. Information onAmericans producing more than one-third of all the manufactured goods inthe world in 1913 is from page 142 of The History of Foreign Investment inthe United States to 1914, cited above. Data on the extent of Americanforeign direct investment to Europe, Canada, and other nations are frompage 14 of the January 3, 2004 issue of The Economist, in an article titled“Free Trade on Trial.” Information on the Tata Group’s internationalacquisitions is from page C3 of the October 18, 2006 issue of the New YorkTimes under the title “An Indian Company Wants to Be Everywhere.” Theeconomic impact of remittances in nations such as Bosnia, Honduras, andLaos as measured by the share of each nation’s GDP from remittances wasshown on page 3 of the Week in Review Section of the November 18, 2007issue of the New York Times, in an article titled “Migrant Money Flow: A$300 Billion Current.” The role of foreigners in various British industriesand in finance was discussed on page 69 of Alien Immigrants to England byW. Cunningham and on pages 325 to 340 of The Persecution of Huguenotsand French Economic Development: 1680–1720 by Warren C. Scoville. The

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statement by Fernand Braudel that immigrants created modern Brazil,Argentina, and Chile is from page 440 of his book A History ofCivilizations. The economic role of the Lebanese in Africa was discussed onpage 309 of “The Lebanese in West Africa,” by R. Bayly Winder, whichappeared in Vol. IV, No. 3 (April 1962) of Comparative Studies in Society andHistory. The economic role of the Greeks in the Ottoman Empire wasdiscussed on pages 262, 263 and 266 of “The Transformation of theEconomic Position of the Millets in the Nineteenth Century,” by CharlesIssawi, which appeared in Volume I of Christians and Jews in the OttomanEmpire: The Functioning of a Plural Society, edited by Benjamin Braude andBernard Lewis. The economic role of the Germans in Brazil was discussedin Chapter 2 of Migrations and Cultures by Thomas Sowell and the role ofthe Chinese in Malaysia and the Indians in Fiji were discussed in Chapters5 and 7 of the same book. The role of the British in Argentina was discussedthroughout British-Owned Railways in Argentina: Their Effect on EconomicNationalism, 1854–1948 by Winthrop R. Wright. The role of the Belgiansin Russia was discussed on page 35 of Pioneers for Profit by John P. McKay.Cambodian ownership of most doughnut shops in California was discussedin a front-page story in the February 22, 1995 issue of the Wall Street Journalunder the title “How Cambodians Came to Control California Doughnuts.”The fact that most doctors in Britain are foreign was reported in theOctober 25, 1998 issue of the British newspaper The Independent. TheSpanish cleric who supported expulsion of the Moriscoes was quoted onpage 795 of The Mediterranean and the Mediterranean World in the Age ofPhilip II, Vol. II by Fernand Braudel, 1973 English translation. Data on theemigration of educated people from various countries is from page 94 of theApril 2, 2005 issue of The Economist. Differences in the percentage ofimmigrants on welfare are from page 126 of The Debate in the United Statesover Immigration, edited by Peter Duignan and Lewis H. Gann. Thepercentage of the world’s land inhabited by Western Europeans and theadditional percentage controlled by them in their overseas colonies is frompage 87 of The Dynamics of Global Dominance by David B. Abernethy. Thefact that foreign direct investment in the Arab Middle East rose from $4billion in 2001 to $19 billion in 2006 was reported on page A13 of an article

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beginning on page A1 of the July 19, 2007 issue of the Wall Street Journal,under the headline “Desert Oasis: Boom in Investment Powers MideastGrowth.” Data on American investments in the Netherlands and in Africain 2001 are from page 20 of the February 2003 issue of Survey of CurrentBusiness. The positive growth rates of poor countries that are more“globalized” and the negative growth rates of those that are not are frompage 67 of The Economist of December 8, 2001, under the title “GoingGlobal.” The percentage of Latin American businesses owned bymultinational companies in 1991 and 2001 is from page 109 of The World in2004, published by The Economist magazine. The fact that foreigners tooknearly $270 billion out of the American economy in 2001 is based on dataon page 10 of the February 2003 issue of the Survey of Current Business. Thedecline in the ratio of mean income between the top 20 nations and thebottom 20 nations from 23-to-1 in 1960 to less than 10-to-1 in 2000 wasshown on page 136 of Reviving the Invisible Hand by Deepak Lal. Thequotation from two Soviet economists on the USSR’s importation ofcapitalist technology is from page 49 of The Turning Point by NikolaiShmelev and Vladimir Popov. P. T. Bauer’s comment on foreign aid is frompage 102 of his book Equality, the Third World, and Economic Delusion. Theestimate that only one person in ten works in a legally recognized enterprisein a typical African nation is from the article “No Title,” on pages 20 to 22of the March 31, 2001 issue of The Economist. The estimate of the numberof illegally built homes in Egypt is from page 20 of The Mystery of Capitalby Hernando de Soto and the value of the illegally held real estate in Peruis from pages 33 and 34. Peddlers who became founders of major companieslike Levi Strauss, Macy’s, etc. were discussed in Chapter 6 of my Migrationsand Cultures, where further specific citations of sources can be found in theend notes. Data on the levels of official development assistance, privatephilanthropy, remittances, and private capital flows sent by the UnitedStates to developing nations in the Third World are from page 16 of TheIndex of Global Philanthropy and Remittances: 2009, published by theHudson Institute Center for Global Prosperity. The fact that privatetransfers of wealth such as philanthropy, remittances, and investment topoor nations exceed the amount of official government development

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assistance was shown on page 17 of the same report. Robert Mundell’scomment on the era of the gold standard is from his lecture at the CentralBank of Uruguay in May 2002 and J. P. Morgan’s comment on gold wasquoted on page 41 of The New York Times Century of Business, edited byFloyd Norris and Christine Bockelmann. The varying exchange ratesbetween the dollar and the euro have been discussed in many places,including two news stories beginning on page C1 of the New York Times ofMay 20, 2003 and an article in the May 19, 2003 issue of BusinessWeekmagazine titled “Beware the Super Euro.” The quotation about the effect ofBritain’s pound sterling “weakening” against the euro is from page 52 of theMay 19, 2003 issue of BusinessWeek magazine, under the title “TheWonderful Falling Pound.” The effect of the “strong” Norwegian krone onpurchases of groceries from Sweden was reported on page 42 of the August31, 2002 issue of The Economist, under the title “Have Car-Boot, WillTravel.” The fact that during the first quarter of 2009, the value of theAmerican dollar was rising relative to the Swedish krona and Swiss franc,while at the same time falling in value relative to the British pound andAustralian dollar was shown on page 102 of the April 25, 2009 issue of TheEconomist, under the heading “Exchange Rates Against the Dollar.”


The epigraph by Holman W. Jenkins, Jr. is from page A19 of the October7, 2009 issue of the Wall Street Journal, under the title “The Meaning ofNummi.” The public opinion poll on protectionism and free trade wasmentioned on page 56 of The Race to the Top: The Real Story of Globalization,written by Tomas Larsson. The estimated costs of protectionism in theEuropean Union countries are from page 62 of the same book. The statisticson the number of steel workers and the number of workers in steel-usingindustries are from page 229 of Saving Capitalism from the Capitalists byRaghuram Rajan and Luigi Zingales. The respective costs of producing steelin the United States, Germany, Japan, Brazil, and South Korea werereported on page 61 of The Economist of March 9, 2002. Nassau W. Senior’s

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quote about the high wages and high productivity of English labor back inthe 19th century is from pages 75 to 76 of his Three Lectures on theTransmission of the Precious Metals from Country to Country and theMercantile Theory of Wealth. Professor Jagdish Bhagwati’s experiencedebating at Cornell is from pages 8 and 9 of his book Free Trade Today.Joseph Stiglitz’s criticisms of the International Monetary Fund are found,among other places, in his book Globalization and Its Discontents. The factthat both Germany and China export more merchandise than the UnitedStates is from page 114 of the March 28, 2009 issue of The Economist, underthe heading “Top Exporters.” Data on the increasing role of internationaltrade in the American economy is from page 76 of Saving Capitalism fromthe Capitalists by Rajan and Zingales. Information on the role of foreigninvestments in the economic development of the United States is from “U. S.Foreign Financial Relations in the Twentieth Century,” by BarryEichengreen in The Cambridge Economic History of the United States, Vol. III:The Twentieth Century, edited by Stanley L. Engerman and Robert E.Gallman. Information about the tariff rates in India and the United States isfrom page 106 of the February 10, 2007 issue of The Economist, under theheading “Trade and Output.” Standard and Poor’s downgrading the rating ofIndia’s currency was reported in the August 11, 2001 issue of The Economist,in an article titled “Slaves of the State,” which began on page 58. The reporton failed development projects in Niger is from a front-page story in the May10, 2002 issue of the Wall Street Journal, under the title “The Radio OffersAfricans Rare Aid in Tune with Needs.” The role of entrepreneurs andprofessionals from India in other countries was explored in Chapter 7 ofMigrations and Cultures by Thomas Sowell. The National Bureau ofEconomic Research study showing that East Asian firms with substantialforeign ownership had higher productivity than domestically-owned firmswas titled “Global Links Raise Asian Countries’ Productivity” from theAugust 2002 issue of the NBER Digest.

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CHAPTER 23: MYTHS ABOUT MARKETS

The epigraph is from page 35 of Essays in the Philosophy of Science byCharles Sanders Peirce, in an article originally published in Popular Sciencemagazine in 1878. The quotation about prices as barriers to consumptionwas Joseph Schumpeter’s characterization of popular notions and appearedon page 118 of Essays of J. A. Schumpeter, edited by R.V. Clemence.Information on prices at various California grocery stores is from page 47 ofthe Winter/Spring 2001 issue of Bay Area Consumers’ Checkbook and fromthe Fall 2003/Winter 2004 issue of the same magazine. Comparisons ofprices and service at computer stores are from pages 75, 77 and 78 of theSpring/Summer 2004 issue of the same publication. The higher pricescharged through the General Motors employee benefits plan were discussedin the February 15, 2005 issue of the Wall Street Journal in a story beginningon page B1 under the title “Generic Drugs by Mail Can Be a Raw Deal.”The quote from Gary Becker that he did not know of any documentedexample of predatory pricing is from page 163 of The Economics of Life byGary S. Becker and Guity Nashat Becker. The quote from India’s PrimeMinister Nehru about the number of brands of toothpaste is from page 153of India Unbound by Gurcharan Das. Josiah Wedgwood’s pioneering in theuse of brand names on consumer products was discussed on page 33 ofBrand New by Nancy F. Koehn and Henry Heinz’s pioneering in the use ofbrand names for processed foods on pages 59 and 60. The role ofMcDonald’s in pioneering higher standards for French fries, hamburgersand milk shakes is from Chapter 6 of the revised 1995 edition ofMcDonald’s: Behind the Arches by John F. Love. The fact that Sovietconsumers had used bar codes to identify the makers of various products isfrom page 7 of a special section on consumers (titled “Crowned at Last: ASurvey of Consumer Power”) in the April 2, 2005 issue of The Economist.Information about Good Housekeeping magazine’s test lab and seal ofapproval can be found on pages C1 and C8 of the November 20, 2006 issueof the New York Times , in an article titled “Polishing the GoodHousekeeping Seal.” The growing number of businesses, including Wal-Mart and McDonald’s, that are contracting with the private regulator

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GlobalGap to ensure the safety of the foods purchased from farms aroundthe world was reported on page B1 of the March 11, 2008 issue of the WallStreet Journal , under the headline “Private Food Standards Gain Favor.”Information about the market value of Coca-Cola and the value of theCoca-Cola brand name is from page 19 of Brands and Branding by RitaClifton and John Simmons. The adverse comments about businessmen fromAdam Smith are from the Modern Library edition of The Wealth of Nations,pages 128 and 250. The quote from David Ricardo is from page 133 ofVolume III of The Works and Correspondence of David Ricardo, edited byPiero Sraffa and published by Cambridge University Press. The fact that thebulk of agricultural subsidies go to big corporations, rather than to familyfarmers, can be verified from many sources, including The Structure ofAmerican Industry by Walter Adams and James Brock, ninth edition, page29. Business support for President Nixon’s wage and price controls wasmentioned on page 149 of The Suicidal Corporation by Paul Weaver.Harvard’s endowment of $26 billion was reported on page C1 of theFebruary 17, 2010 issue of the Wall Street Journal, under the title “HarvardTests Market for Its Property Bets.” Information on fees charged by non-profit organizations is from an interview with Peter Drucker that waspublished in the March/April 1999 issue of Philanthropy on page 11.Christopher Hitchens’ comments about the Church of England are frompage 111 of his The Abolition of Britain. Adam Smith’s comments on theself-indulgences of professors are from page 718 of his classic The Wealth ofNations, Modern Library edition. Pre-World War II discrimination againstblacks and Jews by non-profit organizations was discussed on pages 695 and705 of “Through the Back Door: Academic Racism and the Negro Scholarin Historical Perspective” in the Summer 1971 issue of Daedalus, on page480 of American Democracy by Harold J. Laski and on page 323 of AnAmerican Dilemma by Gunnar Myrdal. The controversial practice of non-profit organizations selling the right to use their logos to commercialbusinesses was discussed in a New York Times story beginning on page A1of the May 3, 1999 issue, under the title “Marketing Tied to CharitiesDraws Scrutiny from States.” The $44 million collected by the AmericanMedical Association in 2005 from the sale of database information was

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reported on page B9 of the July 25, 2007 issue of the San FranciscoChronicle, in an article titled “Prescription Mining Raises Millions forDoctors’ Group.” The salaries of symphony orchestras’ musical directorswere revealed on the front page of Section 2 of the July 4, 2004 issue of theNew York Times under the title “The Plight of the White-Tie Worker.” Theoutsourcing of college and university operations to commercial businesseswas discussed in an article beginning on the first page of Section B of theJanuary 28, 2005 issue of The Chronicle of Higher Education. Recent changesin Israeli kibbutzim were discussed on pages A15 and A16 of the March 4,2007 issue of the San Francisco Chronicle, in an article titled “A RadicalExperiment at Israel’s First Kibbutz.” The non-profit organization whoseadmission to not having a doctor or scientist on its staff was discussed in aJanuary 2004 publication of the Capital Research Center titled “TheEnvironmental Working Group: Peddlers of Fear” by Bonner R. Cohen.Comments about “trickle-down” notions by Samuel Rosenman are frompage 128 of The Forgotten Man by Amity Shlaes. Comments about “trickle-down” notions by Barack Obama are from a front-page story from theOctober 30, 2008 issue of Investor’s Business Daily, under the headline“Why the Mortgage Crisis Happened.” The McDonald’s chain’s earlybrushes with bankruptcy were discussed on pages 175 to 181, and 199 ofMcDonald’s: Behind the Arches, 1995 revised edition, by John F. Love.

CHAPTER 24: “NON-ECONOMIC” VALUES

The epigraph is from page 131 of My Times: Adventures in the NewsTrade by John Corry. The fact that Bill Gates has donated 42 percent of hiswealth to charity, while Gordon Moore has donated 63 percent of hisfortune to charity, was shown on page 238 of the October 8, 2007 issue ofForbes, under the title “Cutting Big Checks.” The fact that Americans makelarger donations per capita to charitable causes than Europeans is from page78 of the March 13, 2004 issue of The Economist. The fact that Americansalso donate more than three times as high a percentage of the country’soutput to philanthropic causes than do the Swedes, the French or the

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Japanese was shown in the February 25, 2006 issue of The Economist, onpage 4 of a special section titled “The Business of Giving.” The commentthat the marketplace was “amoral” and the mayor of Stockton’s commentthat “life-sustaining” water could not be entrusted to private enterprise arefrom page 11 of the February 9, 2003 issue of the San Francisco ChronicleMagazine in an article titled “Water Profit on Tap?” The report on theprivatization of the municipal water supply in Argentina is from page 68 ofthe March 22, 2003 issue of The Economist under the title “Raise a Glass.”Comparisons of the private water system in England with the government-owned water system in Scotland are from page 56 of the May 31, 2003 issueof The Economist, under the title “Frozen Taps.” The exchange between anofficial in India and an Indian entrepreneur trying to get him to reduceexcise taxes is from page 234 of India Unbound by Gurcharan Das. The factthat videocassette recorders initially sold for $30,000 each is from page 139of Culture and Prosperity by John Kay. The complaint that newspapers haveto meet profit requirements determined by “faceless Wall Street financialanalysts” is from a letter to the editor of Editor & Publisher magazine,published on page 4 of the October 8, 2001 issue. The New York Timesreporter’s statement that “you cannot expect magnanimity from themarketplace” is from page 27 of the January 18, 2004 issue of the New YorkTimes Magazine, in an article titled “A Poor Cousin of the Middle Class.”The rise of an estimated million people per month out of poverty in Chinawas reported on page 3 of The Undercover Economist by Tim Harford. Thefact that taxes represent a higher share of a price of a gallon of gasoline thanthe earnings of the oil companies was shown on page 1 of Putting Earningsinto Perspective, published by the American Petroleum Institute on April 12,2010. Price controls in West Africa were discussed on page 33 of WestAfrican Trade by Peter Bauer. Data on the financial costs of natural disastersand their costs in human lives in various countries are from page 116 of theMarch 20, 2004 issue of The Economist. Estimates of the value that peopleput on their lives, and of the costs of saving lives in various ways, are bothfrom page 7 of a special supplement titled “Living Dangerously” in TheEconomist of January 24, 2004. The suggestion that the government shouldprovide jobs for the unemployed doing work “to satisfy pressing social

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needs” appeared on page 4 of Section 3 of the February 12, 2006 issue of theNew York Times in an article titled “Chasing Full Employment.”

CHAPTER 25: THE HISTORY OF ECONOMICS

The epigraph is from page 383 of The General Theory of EmploymentInterest and Money, by John Maynard Keynes. Xenophon’s analysis of theeconomic policies of ancient Athens can be found in “On the Means ofImproving the Revenues of the State of Athens,” on pages 33 to 49 of thebook Early Economic Thought, edited by Arthur Eli Monroe. ThomasAquinas’ discussion of prices is from page 64 of his “Summa Theological”which was published in the same book. The mercantilist ideas of ThomasMun are from pages 171 and 172 of his “England’s Treasure by ForraignTrade,” also published in Monroe’s Early Economic Thought. The quote fromSir James Steuart about slavery is from page 337 of Volume I of his Works,1805 edition. Adam Smith’s remark that a society cannot flourish if themajority of its population is poor is from page 79 of his The Wealth ofNations, Modern Library edition. Adam Smith’s negative opinions ofmerchants and manufactures are from page 250 of the same book. AdamSmith’s definition of wealth is from page lvii of the same book. AdamSmith’s rejection of imperialism is from page 325, and his call for Britain toabandon the dream of empire is from page 900 of his The Wealth of Nations,Modern Library edition. Adam Smith’s negative views of slavery can befound on pages 80, 81, and 365 of his The Wealth of Nations, and also page337 of his The Theory of Moral Sentiments, Liberty Classics edition. AdamSmith’s remark about the “unnecessary attention” given by government toissues that can be better resolved in the marketplace is from page 423 of hisThe Wealth of Nations. Sir James Steuart’s belief that is was the role of the“statesman” to intervene in the economy can be found on pages 4, 15, 73,and 88 of Volume I of his Works, 1805 edition. Adam Smith’s opposing viewof government intervention as serving the self-interests of “crafty”politicians is from page 435 of his The Wealth of Nations. David Ricardo’scomments about remaining true to his ideals and convictions was quoted

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from page 372 of Volume VII of The Works and Correspondence of DavidRicardo, edited by Piero Sraffa. The fears of a glutted market were expressedby Vance Packard on page 7 of his book The Waste Makers. Say’s commentsabout increased output in France since the reign of Charles VI are from page137 of his book A Treatise on Political Economy. The idea that aggregatedemand was limitless was expressed by the Physiocrat Le Mercier de laRivière on page 272 of Volume II of his book L’Ordre naturel et essentiel dessociétés politiques. The fact that Harvard University appointed the firstprofessor of economics in the United States back in 1871 is from page 93 ofMemoirs of an Unregulated Economist by George J. Stigler. Adam Smith’sdiscussion of the value of water versus that of diamonds is from page 28 ofhis The Wealth of Nations, Modern Library edition. The belief that utilitywas entirely subjective was expressed by Carl Menger on page 119 of hisPrinciples of Economics, translated by James Dingwall and Bert F. Hoselitz,and also by W. Stanley Jevons on page 39 of his The Theory of PoliticalEconomy, 1957 edition. Carl Menger’s remarks about the limits to theconsumption of food are from page 124 of his book Principles of Economics.W. Stanley Jevons’ rejection of the notion that the value of a productdepended on the labor to produce it is from pages 162 and 163 of his bookThe Theory of Political Economy, cited above. Alfred Marshall’s remarksabout how the value of a product is determined by both its utility andproduction costs are from page 348 of his book Principles of Economics,eighth edition. Alfred Marshall’s comments on the influence of John StuartMill’s Principles of Political Economy are from page 119 of Memorials ofAlfred Marshall, edited by A.C. Pigou. Alfred Marshall’s remarks aboutsocial reformers are from page 174 of the same book. Marshall’s belief thateconomic studies could improve human well-being was quoted from pages418 to 419 of the same book. The quote from the Soviet economists aboutthe interconnected nature of a market economy is from page 172 of TheTurning Point, by Nikolai Shmelev and Vladimir Popov. J.A. Schumpeter’sremarks about the interdependencies in economics are from page 242 of hisHistory of Economic Analysis. François Quesnay’s sketch showing theconnection between various economic activities is from page viii of his bookThe Economical Table. The use of equations by Karl Marx to illustrate the

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interactions in a market economy can be seen throughout Chapter XXI ofVolume II of his Capital, the Kerr edition. Keynes’ belief that his GeneralTheory would revolutionize economic theory was quoted from page 68 ofAmerican Capitalism by John Kenneth Galbraith. The Time magazine issuethat featured a photo of John Maynard Keynes on its cover was mentionedon page 113 of Presidential Economics, second revised edition, by HerbertStein. Samuel Bailey’s analysis of Ricardian economics was discussed in myarticle “Samuel Bailey Revisited” in the November 1970 issue of Economica.The statement that mutually contradictory theories cannot co-existindefinitely in the field of science is from page 17 of The Structure ofScientific Revolutions by Thomas Kuhn. Jacob Viner’s discussion of theproblem of drafting his cost curves is from page 79 of The Long View andthe Short by Jacob Viner. Karl Marx’s statements that competition forcesproducers to pass on cost savings in lower prices appear on pages 310 to 311of Volume III of his Capital, and also in “Wage Labour and Capital,”Section V of Volume I of Selected Works, by Karl Mark and FrederickEngels. Adam Smith’s comment that the benefits of competition in themarketplace are “no part” of the individual capitalist’s intentions is frompage 423 of his The Wealth of Nations, Modern Library edition. Engels’statement that market interactions obstruct the desires of individuals is frompage 476 of Selected Correspondence, by Marx and Engels. J.A. Schumpeter’scomments that ideological bias did not vitiate the analytical work of AdamSmith are from page 352 of Schumpeter’s article “Science and Ideology,” inthe March 1949 issue of American Economic Review. Schumpeter’s beliefthat Adam Smith’s disdain for businessmen did not harm Smith’s scientificachievements is from page 353 of the same article. Schumpeter’s commentsabout Karl Marx are from page 355 of that same article. Schumpeter’sremarks about value judgments and creeds appeared on pages 346 and 358of that same article. The need for “rules of procedure” in scientific endeavorsin order to “crush out ideologically conditioned error” from analysis is frompage 43 of History of Economic Analysis by J.A. Schumpeter. The importanceof ideology and vision in advancing scientific endeavors was noted on page359 of J.A. Schumpeter’s article “Science and Ideology,” from the March1949 issue of American Economic Review. The comments by John Maynard

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Keynes on the power of ideas are from page 383 of his The General Theoryof Employment Interest and Money. George J. Stigler’s statement that a warcan destroy a generation without producing any new intellectualconsequences is from page 21 of his Essays in the History of Economics.

CHAPTER 26: PARTING THOUGHTS

The epigraph is from page 239 of The Road to Serfdom by F.A. Hayek,1972 edition. The quotation from Paul Johnson is from page 138 of TheQuotable Paul Johnson published in 1994 by Farrar, Straus and Giroux.

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sources:layout 1 9/28/2010 12:56 pm page ... - thomas sowell · article by thomas hazlett in a book...

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